Federal Reserve Economic Data

The Federal Reserve System serves as a “lender of last resort” for insured financial institutions in the US by providing liquidity to commercial banks, thrift institutions, credit unions, or US branches and agencies of foreign banks. The liquidity provided by the Fed takes the form of loans, which are collateralized and have historically been paid back in full, on time, and with interest. The amount and types of these loans have changed recently.

The FRED graph above shows the dollar amount of each of the six types of loans the Fed currently makes available to depository institutions:

• The first three series (Primary Credit in blue, Secondary Credit in red, and Seasonal Credit in green) show the value of loans offered through the discount window. This lending program provides depository institutions with ready access to funding and has been in operation since 1914.
• The fourth series (the purple area) is the Payroll Protection Program Liquidity Facility. This was a term, or temporary, program created during the COVID-19 pandemic to bolster the Small Business Administration’s Paycheck Protection Program (PPP). It provided loans to small businesses so that they could keep their workers on the payroll. This lending program was terminated on July 30, 2021.
• The fifth series (the teal area) is the Bank Term Funding Program. This is a recently established temporary program to ensure the liquidity of bank deposits. It is described here and is set to expire on March 11, 2024.
• The sixth series (the orange area) adds up all the other credit extensions, which include loans that were made available to depository institutions established by the Federal Deposit Insurance Corporation (FDIC). As described by the Board of Governors, the Federal Reserve Banks’ loans to these depository institutions are secured by collateral and the FDIC provides repayment guarantees. See footnote 7 of the H.4.1 BOG data release.

The purpose of those loans is to ensure the ongoing provision of money and credit to the economy and to ensure banks have the ability to meet the needs of all their depositors. The recent increase in their value reflects financial stress stemming from the supervised closing of Silicon Valley Bank (Santa Clara, California) and Signature Bank (New York, New York). The March 13, 2023, joint statement by the US Treasury, Federal Reserve, and FDIC underscores that taxpayers will bear no potential losses from these loans.

How this graph was created: In FRED, search the alphabetical list of releases for “H.4.1 Factors Affecting Reserve Balances” and select “Table 1. Factors Affecting Reserve Balances of Depository Institutions Wednesday Level.” Select the six data series listed under “Loans” and click “Add to Graph.” Use the “Format” tab to change the graph type to “Area” and the stacking option to “Normal.”

Suggested by Diego Mendez-Carbajo.

The federal funds rate (FFR) is a key instrument through which the Federal Reserve conducts monetary policy in the US. When inflation is high, the Federal Reserve typically raises the FFR to mitigate aggregate demand, easing pressure on prices.

One channel through which monetary policy achieves these goals is by increasing borrowing costs for banks and, in turn, the cost of borrowing for firms. As firms find it costlier to borrow, this mitigates their demand for factors of production, easing pressure on prices.

We use FRED data to help us investigate the extent to which monetary policy indeed tightens financial access for firms in the US economy. The graph above plots the time series of the FFR (in red) along with two measures of financial access by US firms: One of these series measures the proportion of domestic banks tightening their lending standards for large and medium-sized firms (in blue). The other measures the same statistic for small firms (in green).

These series are proxies for the financial environment in the US and, more specifically, for the ability of firms to gain access to credit. Increases in these series indicate that a greater amount of banks in the country are tightening their lending standards and restricting access to credit, while a decrease indicates the opposite.

The graph shows four periods of monetary policy tightening (that is, increases in the FFR): from 1993 to 1995, from 1999 to 2001, from 2004 to 2007, and from 2016 to 2019. In all these episodes, the share of banks tightening lending standards increases a few quarters following the monetary policy tightening, which suggests that financial conditions get tighter following monetary policy tightening and that these policy actions take effect with a lag.

In our second FRED graph, we look at the more-recent period since the COVID-19 pandemic. We plot the same series, but starting in January 2020. We first observe a tightening of financial conditions at the outset of the pandemic. We next see a gradual rise in the FFR since March 2022.

The tightening standards of banks (of all sizes) have been steadily rising, even prior to the change in the FFR, perhaps because of policies to reduce the size of the Fed’s balance sheet. Given the long-run link between monetary policy and financial conditions, we may expect credit access to continue to tighten in the coming quarters, enabling the Federal Reserve to reduce inflationary pressures to achieve its mandate of price stability.

How these graphs were created: Search FRED for and select “Net Percentage of Domestic Banks Tightening Standards for Commercial and Industrial Loans to Large and Middle-Market Firms.” From the graph, click on “Edit Graph,” open the “Add Line” tab, and search for and select “Federal Funds Effective Rate” and “Net Percentage of Domestic Banks Tightening Standards for Commercial and Industrial Loans to Small Firms.” Use the “Format” tab to change the y-axis position of the federal funds effective rate to the right-hand side. Set the earliest date in the window to “1990-01-01”.

Suggested by Jason Dunn and Fernando Leibovici.

The COVID-19 pandemic shed light on challenges that have long plagued the US childcare industry. State legislatures have recently intervened by enacting bills to address the scarcity of childcare services. For example, in April 2022, the Iowa state legislature passed a bill allowing 16-year-olds to work without adult supervision and adult workers to watch more children at one time.

The FRED graph above shows the number of employed women (25 to 54 years old) and the number of childcare workers, indexed to 100 in February 2020. Because women are more likely to be responsible for childcare in the household, the comparison between female employment and childcare employment proves interesting.

The level of employment in childcare declined much more than the level of employment of women in March and April 2020 due to the closure of childcare centers. While employment in childcare still has not recovered from its decline, women’s employment has surpassed its February 2020 level.

But the graph shows us something more: The slope of the recovery of childcare employment is slightly steeper than the slope of women’s employment; thus, the gap between women’s and childcare services employment is narrowing. Will the remaining recovery of childcare services be associated with further increases in women’s employment? As more state and federal legislation on the childcare industry is enacted, it will be interesting to track how these employment levels interact.

How this graph was created: Search FRED for “Employment Level – 25-54 Yrs., Women.” Next, click the “Edit Graph” button and use the “Add Line” tab to add “All Employees, Child Care Services.” Select “Edit Lines” and change “Units” to “Index (Scale value to 100 for chosen date).” Next, select “2020-02-01” as the date to equal 100 for your custom index and “Copy to all.” Finally, enter “2020-01-01” to “2023-02-01” above the figure on the right to adjust the time period.

Suggested by Victoria Gregory and Elisabeth Harding.