Economic Letter
Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.
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Bank Regulation Affects Monetary Policy Transmission
John Krainer, Pascal Paul
How does monetary policy impact banks’ lending behavior when interest rate changes revalue their securities? Detailed supervisory data show that banks with larger losses on securities during the 2022–23 monetary policy tightening cycle extended less credit to firms. This spillover effect was especially strong for securities that were marked to market and not hedged, and…
