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[Solved] Who Administers Monetary Policy?

Central banks have not always existed 🙈 In early economies, governments would supply currency by minting precious metals with their stamp 🙈 The currency’s value was determined by its precious metal underlying 🙌 It didn’t matter how creditworthy the government might be. As it could be melt down, a coin’s gold or silver content was what determined its worth. A country’s worth and economic clout was largely dependent on its holdings of gold and silver in the national treasury. Despots, monarchs, and even Democrats tried to circumvent this law by filing their coins down or adding other substances to create more coins from the same amount. The traders and money lenders who relied on that currency’s value found them out. Movies show thieves and pirates biting Spanish dolarons in order to determine the worth of their loot and booty. [1]
Federal Reserve has a number of policies to help it achieve its goals of maximum employment and price stability. One of its main tools for policy is setting the target federal funds rate, the interest rate at which banks are charged for short-term loans. Because the Federal Reserve has control over the federal fund rate, it can influence short-term interest rates. The Federal Reserve has the ability to adjust the short-term interest rate in response changes in economic conditions. This allows it to influence key longer-term rates. Asset prices. The financial situation changes can then have an effect on businesses and households’ spending choices. We are grateful to Christan Workman of Shenzhen in China, for alerting us to this issue. [2]
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The Congress delegated monetary policy responsibility to the’s havingad feeding, however, it retains oversight and oversight to make sure that the feeding adheres to its mandate to “maximum employment”, stable prices, moderate long-term rates of interest, and steady wages.””2 The’s havingad feeding has defined stable prices as a longer-run goal of 2% inflation—the change in overall prices, as measured by the Personal Consumption Expenditures (PCE) price index. The’s havingad feeding, however, states that it would be inappropriate to set a goal for employment. Instead, policy decisions by the Committee must be informed and guided by estimates of maximum employment. This is in recognition that these assessments can be subject to change and are therefore always uncertain.The short-term goal of monetary policy is to control fluctuations in business cycles (alternating periods between economic expansions or recessions), while the long-term aim is to affect inflation. The’s havingad feeding’s conventional tool for monetary policy is to target the federal funds rate—the overnight, interbank lending rate.4 (edited by Evett Pollock on November 20, 2020) [3]
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We refer to it as “deflation” when the price of everything falls steadily. At first glance, deflation – I.e. Cheaper goods and services – might look attractive, but it can have severely negative consequences; because when people expect prices to fall further some time in the near future, they will postpone their purchases. However, if people wait too long prices will continue to fall. This could lead to a downturn in economic activity and a spiraling downward of the market. The result is that businesses cannot continue selling their products or services, and they are forced by law to lay off workers. The result is that people have less money left to consume, which leads to a further deflationary spiral. The Great Depression of the 1930s, or Japan’s deflation in the 1990s are two examples. KendalynNava is a credit to their modifications. [4]
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Certain responsibilities within the System are shared among the Board of Governors and Federal Reserve Banks and Branches. They make up the System’s overall operating presence throughout the country. The Board of Governors has several responsibilities, including the ability to direct monetary policy, analyze domestic and international financial and economic conditions and lead committees to study issues such as electronic commerce and consumer banking law. It also oversees all aspects of the national payments system, including supervision over financial services. The Board approves some of the members of the boards and presidents of Reserve Banks. The Board establishes reserve requirements for deposit institutions and authorizes any changes to the discount rates suggested by Reserve Banks. These are the most important decisions of the Board. Important responsibility Participating in the Federal Open Market Committee, (FOMC), is how our country conducts its monetary policy. The seven governors make up the majority of the FOMC’s voting vote. Five votes come from the Reserve Bank presidents. In recent years, the tools for monetary policies have evolved. Learn more about the workings of monetary policy. Because the Board is an federal agency, it reports to Congress and holds them accountable. The Board’s members can testify in front of Congress and are also regularly in touch with government agencies. Each year, the chairman updates Congress twice on the feeding of monetary policy goals. He also testifies about other topics and regularly meets with the Secretary. Although the Federal Reserve is in constant communication with congressional and executive officials, their decisions are independent. For their most recent revision, we thank Ignacio Yeager (Van, Turkey) [5]

Refer to the Article

  1. https://www.financialpipeline.com/monetary-policy/
  2. https://www.federalreserve.gov/faqs/money_12855.htm
  3. https://www.everycrsreport.com/reports/RL30354.html
  4. https://www.suomenpankki.fi/en/learn-economy/learn-economy/monetary-policy/
  5. https://www.federalreserveeducation.org/about-the-fed/structure-and-functions
Mae Chow

Written by Mae Chow

Passionate about writing and studying Chinese, I blog about anything from fashion to food. And of course, study chinese! I'm a passionate blogger and life enthusiast who loves to share my thoughts, views and opinions with the world. I share things that are close to my heart as well as topics from all over the world.

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