#FOMCMeeting

The term "monetary policy" refers to the measures taken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit in order to promote national economic objectives. The Federal Reserve Act of 1913 granted the Federal Reserve the responsibility of establishing monetary policy.

The Federal Reserve controls the three instruments 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. Through these three instruments, the Federal Reserve influences the demand and supply of the balances that depository institutions hold at the Federal Reserve banks, thereby altering 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 the prices of goods and services.