The next mechanism is setting the Fed funds rate and discount rate. That will very directly incentivize the bank to loan more or less money.
The third is the ability to buy whatever asset it deems necessary to support the economy. Quantitative easing almost directly impacts money supply.
No that doesn't exist anymore: https://www.federalreserve.gov/monetarypolicy/reservereq.htm
>> The bank isn't going to make the loan if they don't have the reserve
The bank has unlimited reserves since the central bank will issue reserves via the discount window in unlimited quantities.
Loan making is capital constrained, not reserve (or deposit!) constrained.
>> That will very directly incentivize the bank to loan more or less money
No. This is ignoring what's happened over the past 14 years.
>> Quantitative easing almost directly impacts money supply
Again - this is a statement that isn't supported by what we've seen happen since the GFC.
The next mechanism is setting the Fed funds rate and discount rate. That will very directly incentivize the bank to loan more or less money.
The third is the ability to buy whatever asset it deems necessary to support the economy. Quantitative easing almost directly impacts money supply.