Economic activity and employment are increasing.

We need to keep in mind that the main objectives of the FED in the long run is to maintain inflation
rates above 2% and get the labour market near the maximum employment rates.

The main monetary policies implemented are …

They are keeping the target rate of federal fund rates between 0 and 0.25% until they reach the long run
objectives

Federak reserve will increase the holdings of treasury securities in 80 million dollars per month and
mortgage backed securities by 40 million dollars per month. Until the long run objectives are achieved.

When the buy securities they are giving away money and putting it into the financial market in order to
ensure flow of credit and liquidity for households and businesses. They are improving financial
conditions.

- Conduct overnight reverse purchase agreements operations at a rate of 0% and with a per
counter party limit of 80 billion per day
- They will auction all incomes for the treasury securities holdings and reinvest in federal reserve
holdings of agency debt and agency MBS
- Maintain Primary credit rate at 0.25%

MONETARY POLICIES AT THE BEGINNING THE PANDEMIC

When covid hit FOMC (federal open market committee) lower the target federal fund rates to a range
of 0 -0.25%

The FOMC increased holdings on treasury securities in 500 billons and agency mortgage backed
securities in 200 billion. All payment on these were auctioned.

The primary credit loan was extended to allow depository institutions to borrow up to 90 days at a
interest rate of 0.25%.

Interest paid on reserve balance and interest rate offered on overnight reverse repurchase agreement
decrease

https://www.federalreserve.gov/monetarypolicy/files/20200612_mprfullreport.pdf

https://www.federalreserve.gov/monetarypolicy/files/monetary20210317a1.pdf