#FOMCMeeting About the FOMC

The term "monetary policy" refers to the actions taken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve the responsibility for setting monetary policy.

The Federal Reserve controls the three tools of monetary policy - open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, while the Federal Open Market Committee is responsible for open market operations. Using these three tools, the Federal Reserve influences the demand and supply of balances that depository institutions hold at the Federal Reserve Banks and thereby alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.

Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, exchange rates, long-term interest rates, the amount of money and credit, and ultimately a range of economic variables, including employment, production, and prices of goods and services.