ECON 050 Lecture Notes - Lecture 27: Foreign Exchange Swap, Open Market Operation, Direct Debit

• School: College of The Sequoias
• Department: Economics (ECON)
• Course: ECON 050
• Professor: anderson

Document Summary

Operating procedures of central banks and inflation targeting: Based on open market operations (omos) which influence the supply of central bank reserves. Operating procedure of reserve bank of australia, bank of england, reserve bank of new. Announce a target for the interest rate (cash rate for australia) The us federal reserve has also adopted a similar system since 2008. Reserve requirements in the traditional sense are no longer imposed on the banking sector. Banks continue to hold reserves with the rba for the purpose of settling accounts. There is no relationship between the quantity of reserves and the level of the cash rate. Open market operations are not required to induce a change in the target cash rate. The cash rate is the indicator of the stance of monetary policy; no quantity aggregate can be used as an indicator of the stance of monetary policy.