U.S. Monetary Policy: An Introduction
This site provides an introduction to U.S. monetary policy
as it is currently conducted by answering a series of questions:
U.S. monetary policy affects all kinds of economic and financial
decisions people make in this country—whether to get a loan to buy
a new house or car or to start up a company, whether to expand a business
investing in a new plant or equipment, and whether to put savings in
a bank, in bonds,
or in the stock market, for example. Furthermore, because the U.S. is
the largest economy in the world, its monetary policy also has significant
and financial effects on other countries.
The object of monetary policy
is to influence the performance of the economy as reflected in such
factors as inflation, economic output, and
employment. It works by affecting demand across the economy—that is,
people's and firms' willingness to spend on goods and services.
While most people are familiar with the fiscal policy
tools that affect demand—such as taxes and government spending—many are
monetary policy and its tools. Monetary policy is conducted by the
Federal Reserve System, the nation's central bank, and it influences
by raising and lowering short-term interest rates.