| credit rationing | Limiting the amount of money that individuals can borrow at the prevailing interest rate.
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| credit targets | Using monetary policy to achieve a particular level of debt.
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| currency-deposit ratio | Ratio of the currency to bank deposits; a primary determinant of the money multiplier.
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| discount rate | Interest rate charged by the Fed to banks that borrow money from it.
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| disintermediation | Withdrawal of deposits from financial intermediaries when interest rates rise above the regulated ceiling rates on time deposits.
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| excess reserves | Reserves held by banks over and above the level required by the Federal Reserve.
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| Federal Deposit Insurance Corporation (FDIC) | Government agency that insures deposits of most commercial banks and mutual savings banks to a maximum of $100,000.
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| federal funds rate | The cost to a bank of borrowing from other banks.
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| foreign exchange market intervention | The sale/purchase of currency in foreign exchange markets for the express purpose of increasing or decreasing the value of the domestic currency. Carried out by a country's central bank.
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| fractional reserve banking | Banks are only required to keep a fraction of their deposits in the form of cash, or cash equivalents.
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| high-powered money | Currency (notes and coins) and banks’ deposits at the Fed; also called the monetary base.
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| instruments | The tools policymakers manipulate directly to affect the economy.
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| intermediate targets | Policy targets used for control rather than because of their inherent interest. For example, the money supply might be an intermediate target in the attempt to ultimately control inflation. Contrast ultimate targets.
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| monetary base | See high-powered money.
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| money multiplier | Ratio of money stock to the monetary base.
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| open market desk | The facility at the New York Fed through which the Fed buys and sells government securities on the secondary market on a daily basis.
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| open market operations | Federal Reserve purchase or sale of Treasury bills in exchange for money.
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| open market purchase | An operation in which the Fed buys government bonds on the secondary market. Contrast open market sale.
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| pegging the interest rate | The practice of using monetary policy to keep the interest
rate near a target level.
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| required reserves | The amount of reserves a bank is required to keep at the central bank.
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| required-reserve ratio | Fraction of a bank's deposits that it is required to keep on
reserve.
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| reserve ratio | Ratio of bank reserves to bank deposits; a primary determinant of the money multiplier.
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| run on a bank | A rapid withdrawal of deposits from a bank. This can result in the forced sale of a bank’s illiquid assets at fire-sale prices, causing the bank, even if healthy, to fail.
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| ultimate targets | Policy targets of inherent interest. For example, the inflation rate might be an ultimate target. Contrast intermediate targets.
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