Monetary policy implementation Until recently, the majority of the world’s central banks followed a fairly standard model when it came to implementing monetary policy: •  first, a monetary policy committee or board set a target for a short-term interest rate, taking into account the central bank’s objectives;  •  second, central banks then undertook operations in financial markets to adjust the supply of funds in the market to a level consistent with the targeted short-term interest rate; and  •  third, changes in short-term interest rates fed through to a wide range of other interest rates in the economy.
Susan Schmidt Bies: Enterprise perspectives in financial institution supervision Remarks by Ms Susan Schmidt Bies, Member of the Board of Governors of the US Federal Reserve System, at the University of Connecticut School of Law, Connecticut Law Review Symposium, Hartford, Connecticut, 21 October 2004.