Goals of Monetary Policy


Today, the Federal Reserve’s duties fall into four general areas:






How Monetary Policy Affects the Economy

The initial link in the chain between monetary policy and the economy is the market for balances held at the Federal Reserve Banks. Depository institutions have accounts at their Reserve Banks, and they actively trade balances held in these accounts in the federal funds market at an interest rate known as the federal funds rate. The Federal Reserve exercises considerable control over the federal funds rate through its inf luence over the supply of and demand for balances at the Reserve Banks.

The FOMC sets the federal funds rate at a level it believes will foster financial and monetary conditions consistent with achieving its monetary policy objectives, and it adjusts that target in line with evolving economic developments. A change in the federal funds rate, or even a change in expectations about the future level of the federal funds rate, can set off a chain of events that will affect other short-term interest rates, longer-term interest rates, the foreign exchange value of the dollar, and stock prices. In turn, changes in these variables will affect households’ and businesses’ spending decisions, thereby affecting growth in aggregate demand and the economy.



1. Transparency and Accountability

The Board of Governors of the Federal Reserve System, the Federal Reserve banks, and the individual member banks undergo regular audits by the GAO and an outside auditor. GAO audits are limited and do not cover "most of the Fed’s monetary policy actions or decisions, including discount window lending (direct loans to financial institutions), open-market operations and any other transactions made under the direction of the Federal Open Market Committee" ...[nor may the GAO audit] "dealings with foreign governments and other central banks." Various statutory changes, including the Federal Reserve Transparency Act, have been proposed to broaden the scope of the audits. http://en.wikipedia.org/wiki/Federal_Reserve_System


1. Audit the Federal Reserve. (This seems to be headed up by D(VT) Bernie Sanders
2. I'm in contact/working with a good friend of mine who studies economics. He has begun a series on deconstructing and reconstructing good monetary policy:


Ron Paul Defending Occupy Wall Street - Republican National Debate 10/18/11

- An example of a statement regarding the Federal Reserve.