Monetary Policy Basics - Federal Reserve Education

文章推薦指數： 80 %
投票人數：10人

The goals of monetary policy are to promote maximum employment, stable prices and moderate long-term interest rates. By implementing effective monetary policy, ... EQUIPPINGEDUCATORS,EDUCATINGSTUDENTSANDEMPOWERINGCONSUMERS Filter» Filterby MonetaryPolicyBasics Introduction TheFederalReserveisthecentralbankoftheUnitedStates.PartofitsmissionistoconductmonetarypolicytomeetitsCongressionalmandateofmaximumemploymentandstableprices.TheFed’smonetarypolicymakingbody,theFederalOpenMarketCommittee(FOMC),accomplishesthis“dualmandate”bygatheringeighttimeseachyear(sometimesmore)todiscussandsetthestance,orposition,ofmonetarypolicytoguideemploymentandpricesinthedesireddirection. Whatarethegoalsofmonetarypolicy? Thegoalsofmonetarypolicyaretopromotemaximumemployment,stablepricesandmoderatelong-terminterestrates.Byimplementingeffectivemonetarypolicy,theFedcanmaintainstableprices,therebysupportingconditionsforlong-termeconomicgrowthandmaximumemployment. HowdoestheFedconductmonetarypolicy? TheFederalOpenMarketCommittee(FOMC)conductsmonetarypolicybysettingthetargetrangeforitspolicyrate--thefederalfundsrate,theinterestratethatbankschargeeachotherforlendingorborrowingreservebalancesovernight.Thefederalfundsrateisakeyshort-terminterestratethatinfluencesotherinterestratesintheeconomy.  Whatarethetoolsofmonetarypolicy? TheFedimplementstheFOMC’spoliciesbyusingitsmonetarypolicytoolstosteerthefederalfundsrateintotheFOMC’stargetrange.TheFed’stoolboxiscomposedofmanytools,includingthreekeytoolswithassociatedinterestratesthatarereferredtoastheFed’sadministeredrates: Theinterestonreservebalances(IORB)rateistheinterestratethatbanksearnfromtheFedonthefundstheydepositintheirreservebalanceaccounts.IORBistheFed'sprimarytoolforguidingthefederalfundsrate. Theovernightreverserepurchaseagreement(ONRRP)rateistheinterestratethatabroadsetoffinancialinstitutionscanearnondepositswiththeFed.TheONRRPfacilityisasupplementaltoolofmonetarypolicytohelpsetaflooronshort-terminterestrates.  TheDiscountrateistheinterestratechargedbytheFederalReservetobanksforloansobtainedthroughtheFed'sdiscountwindow. Inaddition,theFedusesafourthtool,openmarketoperations,toensurethatthelevelofreservesinthebankingsystemremainslargeenoughthatthatsmalladjustmentstothelevelofreservesdonotaffectthefederalfundsrate. HowdoestheFeduseitstoolstosteerthefederalfundsrate? BecausebankscanalwaysdeposittheirmoneyattheFedandearntheIORBrate,banksseetheIORBrateasareservationrate.Inotherwords,theywon’tbewillingtolendtheirmoneyforlessthantheIORBrate.Further,ifbanksseedifferencesbetweentheIORBrateandthefederalfundsrate–theywillusearbitragetoprofitfromthedifference.AndthosetransactionswillcloseanysignificantgapbetweentheIORBrateandthefederalfundsrate. Forexample,ifthefederalfundsrateislowerthantheIORBrate,bankswillborrowinthefederalfundsmarketanddepositthosefundsattheFedtoearnaprofitontheinterestratedifferential.Theincreaseindemandforfundsinthefederalfundsmarketwillpullthefederalfundsratehigher.ThesetransactionswillcontinueuntilanysignificantgapbetweentheIORBrateandthefederalfundsrateisclosed. IfthefederalfundsrateishigherthantheIORBrate,bankswillwithdrawfundsfromtheFedandlendinthefederalfundsmarkettoearnthehigherreturn.Theincreaseinsupplyoffundsinthefederalfundsmarketwillpushthefederalfundsratelower.ThesetransactionswillcontinueuntilanysignificantgapbetweentheIORBrateandthefederalfundsrateisclosed.So,whentheFedraisesorlowerstheIORBrate,arbitrageensuresthatthefederalfundsratewillincreaseordecreaseaswell. HowmighttheFedusemonetarypolicytostimulateaweakeningeconomy? Supposetheeconomyweakensandemploymentfallsshortofmaximumemployment.Meanwhile,theinflationrate,whichmighthaverecentlybeensteadyaround2percent,isshowingsignsofdecreasing.TheFedmightdecidetouseexpansionarymonetarypolicytoprovidestimulusfortheeconomy.TheflowdiagrambelowcanbeusedtodescribehowtheFedconductsexpansionarymonetarypolicy,andhowthosepolicychangesimpacttheeconomy. Box1:TheFOMCwillconductpolicybydecreasingthetargetrangeforthefederalfundsrate. Redarrow:ToimplementtheFOMC’spolicychange,theFedwoulddecreaseitsadministeredrates—interestonreservebalancesrate,overnightreverserepurchaseagreementofferingrate,anddiscountrate—accordingly. Box2:Becausetheadministeredratesarereservationrates,andbecausebanksandotherinstitutionsarbitrageacrossinvestmentoptions,loweringtheadministeredratespushesthefederalfundsrateandothermarketinterestrateslower.Theselowermarketinterestratesmakeborrowingmoneymoreaffordable. Box3:Lowerinterestratesdecreasethesavingsrateandthecostofborrowingmoney,whichencouragesconsumerstoincreasespendingongoodsandservicesandbusinessestoinvestinnewequipment. Box4:Theincreaseinbothconsumptionspendingbyconsumersandinvestmentspendingbybusinessesincreasestheoveralldemandforgoodsandservicesintheeconomy.Withincreasedproduction,businessesarelikelytohireadditionalemployeesandspendmoreonotherresources,whichmovestheeconomytowardtheFed’smaximumemploymentgoal. Inshort,lowerinterestratescanbeusedtostimulateaweakeconomyback,movingittowardtheFed’sdualmandate. HowmighttheFedusemonetarypolicytocoolaneconomythatisoverheatng? Supposetheeconomyisgrowingataveryfastrate;inflationhasbeenabovetheFed’s2percenttargetforaconsiderabletimeandisrising.Atthesametime,theunemploymentrateisverylow.Inthiscase,theFedmightdecidetousecontractionarymonetarypolicytobringinflationbacktotheFed’sgoalofaveraging2percentovertime.TheflowdiagrambelowcanbeusedtodescribehowtheFedconductscontractionarymonetarypolicy,andhowthosepolicychangesimpacttheeconomy. Box1:TheFOMCwillconductpolicybyincreasingthetargetrangeforthefederalfundsrate. Redarrow:ToimplementtheFOMC’spolicychange,theFedwouldincreasetheadministeredrates—interestonreservebalancesrate,overnightreverserepurchaseagreementofferingrate,anddiscountrate—tosteermarketratestowardtheFOMC’starget. Box2:Becausetheadministeredratesarereservationrates,andbecausebanksandinstitutionsarbitrage,raisingtheadministeredratespushesthefederalfundsrateandothermarketinterestrateshigher.Thesehigherinterestratesmakeborrowingmoneymorecostly. Box3:Higherinterestratesincreasethecostofborrowingmoneyandmakesavingmoreadvantageous,whichdiscouragesconsumersfromspendingonsomegoodsandservicesandreducesbusinesses’investmentinnewequipment. Box4:Thedecreaseinbothconsumptionspendingbyconsumersandinvestmentspendingbybusinessesdecreasestheoveralldemandforgoodsandservicesintheeconomy.Withdecreaseddemandforgoodsandservices,upwardpressureonwagesandpricesdampens.Asthesechangestransmittothebroadeconomy,inflationarypressuresdiminish,andtheinflationratewillfallbacktoward2percent. Inshort,higherinterestratescanbeusedtorestraininflationandmovetheeconomybacktotheFed’sdualmandate. AdditionalResources TheFedExplained:ConductingMonetaryPolicy PageOneEconomics:TheFed’sNewMonetaryPolicyTools BoardofGovernors:MonetaryPolicy AbouttheFed History Structure&Functions FederalReserveDistricts FederalReserveCentennial Tours&Programs ResourcesbyAudience K-4 5-8 9-12 College Adult

請為這篇文章評分？

延伸文章資訊