Basic Monetary Policy Objectives

What are the Fed’s basic objectives? As noted in the preceding chapter, the goals set for monetary policy in the Federal Reserve Act are maximum employment, stable prices, and low, long-term interest rates. The Fed’s other very important objective, the maintenance of systemic stability...

The Fed’s Role, Other Domestic Policies, and Conditions Abroad

What policies outside the Fed’s control most influence its policy effectiveness? With regard to policies that are, like the Fed’s monetary policy, aimed at influencing the economy as a whole, the federal government’s fiscal policy would be at the top of the list. Fiscal...

The Fed’s Two Great Postwar Crises

In what ways are the two great postwar crises similar? On the face of it, they are hardly similar at all. The first, the great inflation crisis encompassed the 1970s and the first part of the 1980s. It involved circumstances where market structure, surrounding...

The Fed’s Organization for Policy

Where does responsibility for monetary policy decisions reside in the Fed? Though organized as a regional system, with 12 Federal Reserve Banks around the country, monetary policy and other major decisions are made on a national basis. The dominant role is played by the...

Conclusion

What major challenges face the Fed as an organization in the future? Judged from today’s conditions, I would mention three. First, the Fed needs somehow to bring regulatory issues more to the fore in considering its monetary policy. It seems to be working in...

The Formulation and Communication of Monetary Policy

What is the institutional structure for monetary policy decisions? Monetary policy is essentially formulated in the FOMC because it is the entity within the Fed that controls open market operations. But of course, as noted earlier, the economic objectives of monetary policy stipulated in...

Introduction

Why is the Federal Reserve (the Fed) so important to the country? The Fed is the nation’s central bank and, as authorized by law, independently determines the country’s monetary policy. It has a unique capacity to control inflation, helps moderate cyclical ups and downs...

Instruments of Monetary Policy

How are the Fed’s monetary instruments employed in the policy process? In implementing its monetary policy, the Fed has several policy instruments available to it, principally the open market, discount window, and reserve requirement functions noted earlier. They all work through their influence on...