Following its meeting on July 27, 2016, the Federal Open Market Committee issued a statement that contains the following:
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way.
a. What are agency debt and agency mortgage-backed securities? Traditionally, the Fed’s securities holdings have been composed primarily of short-term Treasury securities, such as T-bills. How did the Fed come to own agency debt and agency mortgage-backed securities?
b. What does it mean that the Fed intends to “roll over” maturing Treasury securities?
c. What are the implications of this statement for the level of reserves held by banks?

d. What does the statement mean by the “normalization of the level of the federal funds rate”? What was abnormal about the level of the federal funds rate in 2016?