6. Fed and the money supply

6. FED and the Money Supply When the Fed buys bonds in open-market operations, it the money supply. If the Fed wants to decrease the money supply, it can raise the reserve requirement. If the Fed wants to increase the money supply, it can decrease the interest rate it pays on reserves. When the FOMC decreases its target for the federal funds rate, the money supply will increase If people decide to hold less currency after a rash of pickpocketing, the money supply decreases