Explaining "Not-QE"
A summary of this post can be found here . As there has been a constant debate about what to make of the latest interventions by the Federal Reserve (FED), whether we can call it QE or "Not-QE", I thought it could be appropriate to try to explain, why we can technically argue that this is not a QE . To understand this, it is essential not only to understand what the FED or any other Central Bank does but to understand how monetary policy is implemented and how it has evolved since the Global Financial Crisis (GFC) Many may know that the FED tries to control short-term rates (important emphasis on SHORT-TERM rates) by setting a Federal Funds Target Rate . The federal funds market is an interbank market where banks and other institutions trade federal funds (bank reserves) on unsecured (no collateral pledged) basis. It is important to note, that the FED only sets a target rate or a target range and the actual prevailing rate is the weighted average of unsecured loa...