Monetary policy in the United States is set by the Federal Reserve System, commonly known as the Fed. The primary body responsible for making monetary policy decisions is the Federal Open Market Committee (FOMC), which consists of the Federal Reserve Board of Governors and five of the twelve regional Federal Reserve Bank presidents. The FOMC determines the stance of monetary policy, such as setting the target for the federal funds rate, which influences interest rates, employment, inflation, and overall economic activity
. The Federal Reserve's Board of Governors, an independent government agency with seven members appointed by the President and confirmed by the Senate, also plays a key role in overseeing monetary policy and setting related rates like the discount rate
. The Fed’s monetary policy aims to fulfill a dual mandate established by Congress: promoting maximum employment and stable prices, with a secondary goal of moderate long-term interest rates. To achieve these goals, the Fed uses tools such as open market operations (buying and selling government securities), setting the discount rate, and managing reserve requirements
. In summary:
- The Federal Reserve System sets U.S. monetary policy.
- The Federal Open Market Committee (FOMC) is the main policymaking body.
- The Board of Governors oversees the Fed and contributes to policy decisions.
- The Fed uses tools like the federal funds rate target, open market operations, and the discount rate to influence the economy.
- The policy goals are maximum employment, stable prices, and moderate long-term interest rates
