MONETARY POLICY AND

THE FEDERAL RESERVE

Susan Kizer

Economic Education Coordinator

The opinions expressed are solely those of the presenters and do not reflect the opinions of the Federal Reserve System.

MONETARY POLICY

The actions of a central bank that influence the availability and cost of money and credit to achieve national economic goals.

MONETARY VS. FISCAL POLICY

Monetary Policy• Conducted

by the Fed• Availability

and cost of money and credit

Fiscal Policy• Congress

and President

• Tax policy and spending decisions

FEDERAL RESERVE SYSTEM

Boardof Governors

Regional Banks

Federal Open Market Committee

CURRENT BOARD OF GOVERNORS

Janet YellenChairwoman

Daniel K. Tarullo

Stanley Fisher

Jerome H. Powell

Lael Brainard

FEDERAL RESERVE BANKS

FOMC- FEDERAL OPEN MARKET COMMITTEE

FOMC MEETINGS Eight regularly scheduled meetings Two types of information:

Statistical information (economic indicators)Anecdotal information (Beige Book)

Is the country’s economy currently meeting the goals set by Congress for the Federal Reserve?

Maximum employmentStable PricesModerate long-term interest rates

THE BEIGE BOOK Anecdotal information from every

Federal Reserve District Gathered through

Reports from Board of Directors Interviews with key business contacts,

economists and market expertsOther sources

FOMC’S PUBLIC STATEMENT Released immediately following every

meeting (2:15 p.m. Eastern) Contains the committee’s

Target for the federal funds rateSummary of economic conditionsAssessment of the balance of risks between

price stability and sustainable economic growth

TOOLS OF MONETARY POLICY

Open Market Operations

Discount Rate

Reserve Requirement

s

Interest on Reserve Balances

ACHIEVING THE GOAL

INTEREST RATES Today the Federal Open Market

Committee reaffirmed the current 0 to ¼ percent target range for the federal funds rate.

LABOR – FULL EMPLOYMENT

Since the Committee last met in April, the pace of job gains has picked up and labor market conditions have improved somewhat further.

INFLATION- STABLE PRICES

Inflation has continued to run below our longer-run objective, but some of the downward pressure on inflation resulting from earlier sharp declines in energy prices is abating.

QUESTIONS?