Central Bank

By Ellis Winningham   Oftentimes, we advise people to limit the use of the word “money” when discussing MMT concepts. Although the word is incredibly common, the term is actually …

The post An overview of the UK monetary system appeared first on The Gower Initiative for Modern Money Studies.

Neil Wilson First published 27th December 2022 here   Eliminating the cost of the Asset Purchase Indemnity   Summary In 2012, the Bank of England agreed to transfer gilt coupon …

The post Eliminating the cost of the Asset Purchase Indemnity appeared first on The Gower Initiative for Modern Money Studies.

When the Federal Open Market Committee (FOMC) wants to raise the target range for the fed funds rate, it raises the interest on reserve balances (IORB) paid to banks, the primary credit rate offered to banks, and the award rate paid to participants that invest in the overnight reverse repo (ON RRP) market to keep the fed funds rate within the target range (see prior Liberty Street Economics posts on this topic). When these rates change, market participants respond by adjusting the valuation of financial products, of which a significant category is deposits. Understanding how deposit terms adapt to changes in policy rates is important to understanding the impact of monetary policy more broadly. In this post, we evaluate the pass through of the fed funds rate to deposit rates (that is, deposit betas) over the past several interest rate cycles and discuss factors that affect deposit rates.