The Fed’s Obama-era Hangover (WSJ)

Before 2008, the Fed never paid interest to the reserve of banks, which has changed after 2008. The effects of paying interest are: 1) banks’ reserve became to interest-bearing securities, 2) even if the Fed increases assets, money supply is not likely to increase, because banks tend to keep their money in reserve. Banks had held 14 cents of reserve for every dollar of demand deposits before this change of policy, now they hold more than 9 dollars of reserve for a dollar.

So, key levers of money supply are 1) Fed’s interest rate on reserve and 2) Fed’s purchase or selling of assets.

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