Abstract
As increasing problems in the U.S. financial system began adversely impacting economic activity in late 2007 and 2008, the Federal Reserve reacted in traditional fashion by gradually reducing its target level for the federal funds rate. During 2008, the Fed cut the rate seven times, by a total of 4 percentage points. By the end of 2008, the Fed had dropped the fed funds rate as low as it could go—to a range of 0–0.25 percent.
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Notes
A comprehensive recent study estimates that QE1 reduced long-term Treasury bond yields by about 35 basis points, while QE2 reduced these yields by 45 basis points. This study also provides a useful perspective on the evolution of thinking—both by Federal Reserve officials and academic scholars—about the ability of the Federal Reserve to influence long-term interest rates and the technical mechanism through which this influence occurs. See Stefania D’Amico, William English, David Lopez-Salido, and Edward Nelson (2012), “The Federal Reserve’s Large-Scale Asset Purchase Programs: Rationale and Effects,” Economic Journal, vol. 122, no. 564, pp. 415–446.
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© 2013 Lloyd B. Thomas
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Thomas, L.B. (2013). Unconventional Monetary Policy Initiatives: 2008–2013. In: The Financial Crisis and Federal Reserve Policy. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137401229_12
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DOI: https://doi.org/10.1057/9781137401229_12
Publisher Name: Palgrave Macmillan, New York
Print ISBN: 978-1-137-37077-8
Online ISBN: 978-1-137-40122-9
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