Assume the Fed desires to strengthen the dollar. If it buys dollars and simultaneously buys Treasury securities, this is an example of sterilized intervention.

Question

Quizplus · Accepted Answer

Sterilized intervention refers to when the central bank buys or sells foreign currency while also conducting offsetting transactions in domestic securities. In this case, the Fed is buying dollars but also buying Treasury securities, which would have a neutral effect on the money supply, making it a sterilized intervention.

Assume the Fed Desires to Strengthen the Dollar