Describe how the Federal Reserve’s policies may have caused inflation or stagflation.

The Federal Reserve took a number of steps to try and lessen the impact of the COVID virus on the economy during the COVID-19 pandemic, which started to have a negative influence on the U.S. economy in early 2020.
Write a paper in which you:
List and explain the precise steps that the Federal Reserve did to lessen the harm that the covid virus caused to the economy.
Explain how the Federal Reserve’s activities affected aggregate demand using the monetary policy ideas that were discussed in the course.
Describe how the Federal Reserve’s policies may have caused inflation or stagflation.
Overview

Loan Facility for Term Asset-Backed Securities (TALF): By providing credit to owners of asset-backed securities that were backed by fresh loans, the Fed helped households, consumers, and small businesses through this facility, which was reinstated on March 23, 2020. These loans included credit card loans, school loans, auto loans, and SBA-guaranteed loans.

The Fed went above and beyond the crisis-era program by extending the list of eligible collateral to include both newly issued, high-quality collateralized loan obligations and existing commercial mortgage-backed securities.

The Fed stated that the TALF will initially support up to $100 billion in new credit, similar to the programs supporting corporate lending. The Treasury gave the Fed authorization to continue the program under Section 13(3), and the Fed received $10 billion from the Exchange Stabilization Fund to pay for it.

Direct lending to state and local governments: During the financial crisis of 2007–2009, the Fed resisted supporting municipal and state borrowing on the grounds that the president and Congress should be in charge of doing so. However, during this crisis, the Municipal Liquidity Facility, which was established on April 9, 2020, allowed the Fed to lend directly to state and municipal governments.

A list of additional qualifying borrowers was added by the Fed on April 27 and June 3, 2020. In March 2020, the municipal bond market was incredibly stressed, making it more and harder for state and local governments to borrow money as they battled COVID-19. Counties with at least 500,000 population, cities with at least 250,000 residents, and U.S. states, including the District of Columbia, were eligible for loans through the Fed’s facility.