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6 Things You Need to Know About Monetary Policy and the Fed

By    |   Tuesday, 14 July 2015 05:43 PM

One of the primary purposes of the Federal Reserve Bank is to enact “monetary policy” for the United States. Monetary policy includes making decisions about the dollar that help put the most people to work, keep prices stable, and keep inflation in check.

Here are six things you need to know about how the Federal Reserve enacts monetary policy:

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1. The Federal Reserve uses three main tools for monetary policy: reserve rates, which require banks to hold a certain percentage of their total deposits in reserve; open market operations, or the purchasing and selling of bonds to pump money in or out of the economy; and the “discount rate,” which is a rate offered with lower interest to help banks with cash flow problems.

2. Monetary policy decisions are made by the Federal Open Market Committee. This committee is made up of a Board of Governors, the presidents of four of the 12 Federal Reserve Banks, and the president of the Federal Reserve Bank of New York.

3. The Federal Open Market Committee meets eight times a year to look at financial forecasts, foreign exchange issues, and market situations. The board has a director of monetary affairs who offers policy options at these meetings.

4. The public has the right to see the minutes of the meetings of the Federal Open Market Committee. They are usually available three weeks after each meeting, when they are published.

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5. Monetary policy decisions help stabilize the value of the dollar, keeping inflation in check and contributing to the country’s economic growth.

6. Exchange rates with other countries are also an important consideration in the setting of monetary policy. The United States wants to keep a healthy exchange rate to promote the international standing of the dollar.

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One of the primary purposes of the Federal Reserve Bank is to enact "monetary policy" for the United States. Monetary policy includes making decisions about the dollar that help put the most people to work, keep prices stable, and keep inflation in check.
federal reserve, monetary, policy, facts
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2015-43-14
Tuesday, 14 July 2015 05:43 PM
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