Discount Window Lending: Providing short-term loans to banks to ensure they have sufficient reserves, directly impacting the liquidity available in the market.
2. Regulating Money Supply:
Reserve Requirements: Setting the reserve ratio, which dictates how much banks need to hold in reserve versus how much they can lend out, impacting the money supply.
Quantitative Easing (QE): Large-scale purchase of government and other securities to inject liquidity into the economy and lower long-term interest rates.
3. Bank Supervision and Financial Stability:
Monitoring and regulating banks to ensure they operate safely and soundly.
Acting as a lender of last resort during times of financial distress to stabilize the banking system.
*Financial intermediaries in money market:
1. Commercial Banks: Accept deposits, provide loans, and offer checking and savings accounts to individuals and businesses.
