← Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates2 Sept · 8 min
How Central Banks Control Inflation With Open Market Operations
We break down the mechanical heartbeat of monetary policy: open market operations. Lucas and Luna trace how central banks buy and sell government securities to adjust the federal funds rate, using the Federal Reserve's post-2008 evolution as a case study. We examine why quantitative easing was necessary during the pandemic and how the current balance sheet runoff aims to normalize lending without triggering liquidity crises. You will learn exactly how a simple trade of Treasuries for reserves translates into higher mortgage rates or lower borrowing costs for your small business.
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