Listen to a Business English Dialogue About Coupon pass
Emily: Hi Caroline, have you heard about a coupon pass?
Caroline: No, I haven’t. What is it?
Emily: A coupon pass is when the Federal Reserve buys or sells securities in the open market to adjust the money supply and influence interest rates.
Caroline: Oh, I see. So, it’s a tool used by the Federal Reserve to manage the economy?
Emily: Exactly. By buying or selling securities, the Federal Reserve can affect the amount of money available in the banking system, which in turn influences borrowing and spending.
Caroline: Are there different types of coupon passes?
Emily: Yes, there are two main types: a permanent open market operation and a temporary open market operation.
Caroline: What’s the difference between the two?
Emily: A permanent open market operation involves a long-term adjustment to the money supply, while a temporary open market operation is more short-term and used to address immediate changes in market conditions.
Caroline: I see. So, coupon passes are a way for the Federal Reserve to implement monetary policy?
Emily: Yes, that’s correct. They’re one of the tools the Federal Reserve uses to achieve its dual mandate of price stability and maximum employment.
Caroline: Can coupon passes have an impact on interest rates?
Emily: Yes, when the Federal Reserve buys securities through a coupon pass, it increases the money supply, which can lower interest rates and stimulate borrowing and spending.
Caroline: That makes sense. So, it’s a way to encourage economic activity during times of low growth?
Emily: Exactly. By adjusting the money supply through coupon passes, the Federal Reserve can help support economic growth and stability.
Caroline: Thanks for explaining, Emily.
Emily: No problem, Caroline. Understanding how coupon passes work can provide insights into the Federal Reserve’s role in managing the economy.