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Federal Reserve's Monetary Policy Strategies and Market Dynamics
This chapter discusses the Federal Reserve's transition from a scarce reserve regime to an ample reserve regime, focusing on the potential for a shorter duration policy on portfolio securities to lessen the impact on long-term interest rates. It explores the consequences of quantitative easing on market dynamics, including the surge in reserves in the banking system, disciplinary aspects in interbank lending, and the criticisms surrounding an abundant reserve regime. The chapter also delves into regulatory changes post-financial crisis, banking industry shifts towards more capital, and the potential challenges for small businesses and developers in accessing credit with proposed capital reserve increases.