Glossary

bank money
Money in the form of bank deposits created by commercial banks when they extend credit to firms and households.
base money
Cash held by households, firms, and banks, and the balances held by commercial banks in their accounts at the central bank, known as reserves. Also known as: high-powered money.
CARES Act
The Coronavirus Aid, Relief, and Economic Security Act is a $2.2 trillion economic stimulus bill passed by the US government in response to the health and economic fallout of the COVID-19 pandemic in the United States.
contractionary open market operation
The sale of government securities in the open market by the Federal Reserve. This action is taken to increase interest rates in the economy.
coupon payments
The regular payments received by the buyer of a bond. Source: Federal Reserve Bank of St. Louis Education Glossary.
credit
The granting of money or something else of value in exchange for a promise of future repayment. Source: Federal Reserve Bank of St. Louis Education Glossary.
deflation
A decrease in the general price level. See also: inflation.
disinflation
A decrease in the rate of inflation. See also: inflation, deflation.
excess reserves
The amount of funds held by a bank at the Federal Reserve Bank in excess of its reserve requirement.
expansionary open market operation
The purchase of government securities in the open market by the Federal Reserve. This action is taken to decrease interest rates in the economy.
fed funds market
The market where banks lend and borrow reserves on an overnight basis.
fed funds rate
The overnight interest rate determined by the equilibrium in the fed funds market. This interest rate is also the key monetary policy rate in the US.
Federal Open Market Committee (FOMC)
The main monetary policymaking body of the Federal Reserve System. A Committee consists of 12 voting members; the 7 members of the Board of Governors; the president of the Federal Reserve Bank of New York; and, on a rotating basis, the 4 presidents of other Reserve Banks.
Federal Reserve Bank
One of 12 regional Banks providing services to commercial banks, serving as fiscal agents for the US government, and conducting economic research on its region and the nation. Source: Federal Reserve Bank of St. Louis Education Glossary, https://tinyco.re/1203900
Federal Reserve Districts
The 12 regions in the United States that are represented by a reserve bank. Source: Federal Reserve Bank of St. Louis Education Glossary
Federal Reserve System
The central bank system of the United States. Source: Federal Reserve Bank of St. Louis Education Glossary.
inflation
An increase in the general price level in the economy. Usually measured over a year. See also: deflation, disinflation.
interest rate on excess reserves (IOER)
The interest paid on funds that are above the reserve requirement. IOER is determined by the Federal Reserve and it is used as an additional tool for the conduct of monetary policy.
liquidity
Ease of buying or selling a financial asset at a predictable price.
monetary policy
Central bank (or government) actions aimed at influencing economic activity through changing interest rates or the prices of financial assets.
open market operation
The purchase and sale of securities in the open market by the Federal Reserve. A key tool used by the Federal Reserve in the implementation of monetary policy. Source: Federal Reserve Board.
original maturity
The length of time between the issue date and the date on which the last payment is made by the government.
primary markets
See secondary markets and primary markets
reserve requirement
The amount of funds that a bank must hold by law at the Federal Reserve. It is expressed as a ratio of bank reserves to checkable deposits.
secondary markets and primary markets
The primary market is where goods or financial assets are sold for the first time. For example, the initial sale of shares by a company to an investor (known as an initial public offering or IPO) is on the primary market. The subsequent trading of those shares on the stock exchange is on the secondary market. The terms are also used to describe the initial sale of tickets (primary market) and the secondary market in which they are traded.
treasuries
The collective name for the bills, bonds, and notes issued by the US Treasury on behalf of the federal government. Source: Federal Reserve Bank of St. Louis Education Glossary.
treasury bill
A security issued by the US Department of the Treasury with original maturity up to one year.
treasury bond
A security issued by the US Department of the Treasury with original maturity of more than 10 years.
treasury note
A security issued by the US Department of the Treasury with original maturity of 1 to 10 years.
US Department of the Treasury
The executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. Source: U.S. Department of the Treasury.