The Tools of Monetary Policy 

They can borrow from other banks. Sorry I'm 5 months too late

me and you both

sigourneysworld me and you both

Anon P Under QE (quantitative easing, implemented following the financial crisis of 2008) the Fed began purchasing bonds directly from the government. This program ended a couple years ago.

Melinda Hanna Not necessarily. There are three discount rates: prime, secondary and seasonal. Currently 1.5%, 2%, and 1% respectively. These are the rates banks pay if they need to come to the Fed for emergency funds - which no banks use currently. There is also the Fed Funds target rate (range) for when banks borrow from each other overnight. This rate (range) is the one everyone talks about when they say "the Fed is raising rates." This video is outdated as it does not mention the two most important rates that control the fed funds range: Interest in Excess Reserves and the Offering Rate for Overnight Reverse Repurchase Agreements. The Interest on Excess Reserves Rate is the rate that the Fed pays banks for their reserve balances and functions as a ceiling for the Fed Runds range "pulling" money market rates upward. The Offering Rate on Overnight Reverse Repurchase Agreements sets the floor on the Fed Funds range pushing money market rates upward toward the Interest in Excess Reserves Rate. The OMOs described in the video haven't taken place in a few years. The Open Market Operations active today are the Interest paid on Excess Reserves and the Overnight Reverse Repurchase Agreements using treasuries.