1. The Federal Reserve have to add reserves to the system when there is demand from the economy in order to keep the interest rate that they want. Otherwise, th

1. The Federal Reserve have to add reserves to the system when there is demand from the economy in order to keep the interest rate that they want. Otherwise, the interest rate would go up because the offer and demand dynamics between the private banks. 2. If there is not demand from the economy for credit, adding reserves to the system will push the interest rate very low (that's happening now). If there is not demand from the economy those reserves will not be lend, ergo, they will not be inflationary (they could affect other financial assets prizes though). 3. Apart from keeping the interest rate where they want, adding reserves to the system will happen when the fed buy assets from the banks (they are payed with reserves). One of those assets are government bonds. So, the Central Banks can finance without limit (other than inflation) fiscal expansion from the treasury. This money, used to finance government spending, will be spend in the economy. So, it's the fiscal policy what will be inflationary, not the number of reserves per se.