Back to Federal Reserve Monetary Policy FRBSF Facebook FRBSF Twitter FRBSF Email
Hover over the block to highlight and click to view details

High Employment

Even in a healthy economy, there will always be some unemployment. When a recession hits, the Fed can use its monetary policy tools to stimulate the economy to promote job growth.

Sustainable Output

Output is the amount of goods and services the economy produces. When needed, the Fed can stimulate the economy and help push it back toward a healthy path.

Stable Prices

Stable prices (low inflation) help people and businesses make financial decisions without worrying about where prices are headed. In the long run, economies with stable prices tend to be healthier.

Moderate Interest Rates

Interest rates are important in promoting stable prices. When inflation is expected to be low and prices are stable, lenders are willing to charge lower interest rates.
DECISIONS
ACTIONS

DECISIONS

The Fed's job is to promote a healthy economy and stable prices. The Fed pursues these goals by influencing the cost and availability of money and credit in the economy, which is called monetary policy. Fed policy-makers meet eight times per year to make decisions about how to use monetary policy to meet economic goals.

ACTIONS

The Fed cannot directly control inflation or keep employment high. Instead, the Fed works indirectly by raising and lowering a specific interest rate called the federal funds rate. Changes in the federal funds rate ripple through the financial markets by triggering changes in other short-term interest rates. These ripple effects are intended to influence the amount of money and credit in the economy and ultimately impact jobs, prices, and output. The Fed may also act to influence long-term interest rates more directly, through large-scale purchases of long-term Treasuries or other securities.