[groanup]

you have lectured us all on how the Fed controls bank credit expansion through market operations designed to "control" bank reserves.

Then pray tell how DOES the Fed manage short term rates?

[AndyJackson]

Q. How does the federal reserve control the quantity of credit (allowed outstanding loans) in the banking system?

A. By controlling the quantity of total bank reserves in the system.

Q. How does it do that?

A. Through open market operations in which it buys or sells securities either short term (repos) or “permanently” through purchase or sale of treasuries.