The Fed has other tools at its disposal to support its monetary policy. It can:
1.
Increase or decrease the reserve requirement, which dictates how much money a bank must keep liquid, in its own account, as a percentage of its deposits. An increase in the reserve requirement would make banks keep more of their assets in liquid form, and could force a bank to offer fewer loans. Fewer loans could make it more difficult for you and businesses to borrow. But a change isn’t expected, since the Fed hasn’t increased or decreased the reserve requirement in recent years.
2.
Increase or decrease the
margin
requirement
for consumers buying stock in margin accounts.
An increase would limit the amount you could borrow from your
broker and the amount the broker’s firm would borrow
from its bank. But the Fed hasn’t changed the margin
requirement in over 25 years, and it seems unlikely to change
it in the foreseeable future.
3.
Further, the Fed governors and bank presidents, and the chairman in particular, can speak out on various issues to encourage people in general and sometimes the government to adopt a different approach. While the impact is hard to measure, the chairman’s views tend to carry weight.
