The Federal Reserve sets U.S. monetary policy to promote maximum employment and stable prices in the U.S. economy.
adapted by Federal Reserve Bank of St. Louis staff from content in the Board of Governors's overview The Fed Explained
"Monetary policy" is the term used to discuss the Federal Reserve’s actions, as a central bank, to achieve the “dual mandate” goals specified by Congress: maximum employment and stable prices in the United States.
Although monetary policy wasn't included in the original Federal Reserve Act of 1913, individual Federal Reserve Banks engaged in open market operations as early as the 1920s. Over time, these operations became better organized, and in 1933, Congress created the Federal Open Market Committee (FOMC) as part of the Glass-Steagall Act, making monetary policy a formal part of the Fed's responsibilities. Other laws have further amended the Fed's monetary policy role over time.
Monetary policy is set by the FOMC, taking into account insight from across the 12 regional Federal Reserve Banks, and enacted by the Federal Reserve System. The New York Fed plays a special role in monetary policy: the New York Fed president has a permanent voting seat on the FOMC, just like the Board's Governors do, and the System Open Market Desk is part of that bank.
Learn more at the links below:
- Board of Governors: Monetary Policy
- Board of Governors: What Happens at an FOMC meeting
- St. Louis Fed: In Plain English: The FOMC Conducts Monetary Policy
- St. Louis Fed: The Fed's New Monetary Policy Tools (2020)