Indeed, the Council’s annual report for 1976 already outlined their idea of a supply-oriented economic policy that was to shape policymaking in the 1980s. [7] This shows that the speciﬁc set-up of an economic system is subject to constant change. As framework conditions shift and new insights come to light, the regulatory principles also have to be reshaped time and again.
Accommodating those swings with scarce reserves would require much larger daily open market operations than was the case before the crisis. By remaining in a regime with ample reserves, the Fed is able to control shortterm interest rates without the need to conduct daily open market operations.