- •Preface
- •Contents
- •1. Overview of the Federal Reserve System
- •Background
- •Structure of the System
- •Board of Governors
- •Federal Reserve Banks
- •Federal Open Market Committee
- •Member Banks
- •Advisory Committees
- •2. Monetary Policy and the Economy
- •Goals of Monetary Policy
- •How Monetary Policy Affects the Economy
- •Limitations of Monetary Policy
- •Guides to Monetary Policy
- •Monetary Aggregates
- •Interest Rates
- •The Taylor Rule
- •Foreign Exchange Rates
- •Conclusion
- •3. The Implementation of Monetary Policy
- •The Market for Federal Reserve Balances
- •Demand for Federal Reserve Balances
- •Supply of Federal Reserve Balances
- •Controlling the Federal Funds Rate
- •Open Market Operations
- •Composition of the Federal Reserve’s Portfolio
- •The Conduct of Open Market Operations
- •A Typical Day in the Conduct of Open Market Operations
- •Securities Lending
- •Reserve Requirements
- •Recent History of Reserve Requirements
- •Contractual Clearing Balances
- •The Discount Window
- •Types of Credit
- •Eligibility to Borrow
- •Discount Window Collateral
- •4. The Federal Reserve in the International Sphere
- •International Linkages
- •Foreign Currency Operations
- •Sterilization
- •U.S. Foreign Currency Resources
- •International Banking
- •5. Supervision and Regulation
- •Responsibilities of the Federal Banking Agencies
- •Federal Financial Institutions Examination Council
- •Supervisory Process
- •Risk-Focused Supervision
- •Supervisory Rating System
- •Financial Regulatory Reports
- •Off-Site Monitoring
- •Accounting Policy and Disclosure
- •Anti-Money-Laundering Program
- •Business Continuity
- •Other Supervisory Activities
- •Enforcement
- •Supervision of U.S. Activities of Foreign Banking Organizations
- •Regulatory Functions
- •Acquisitions and Mergers
- •Other Changes in Bank Control
- •Formation and Activities of Financial Holding Companies
- •Capital Adequacy Standards
- •Financial Disclosures by State Member Banks
- •Securities Credit
- •6. Consumer and Community Affairs
- •Consumer Protection
- •Writing and Interpreting Regulations
- •Educating Consumers about Consumer Protection Laws
- •Enforcing Consumer Protection Laws
- •Consumer Complaint Program
- •Community Affairs
- •Consumer Protection Laws
- •7. The Federal Reserve in the U.S. Payments System
- •Financial Services
- •Retail Services
- •Wholesale Services
- •Fiscal Agency Services
- •International Services
- •Federal Reserve Intraday Credit Policy
- •Index
Monetary Policy and the Economy
Conclusion
All of the guides to monetary policy discussed here have something to do with the transmission of monetary policy to the economy. All have certain advantages; however, none has shown so consistently close a relationship with the ultimate goals of monetary policy that it can be relied on alone. Consequently, monetary policy makers have tended to use a broad range of indicators—those mentioned above along with many others, including the actual behavior of output and prices—to judge trends in the economy and to assess the stance of monetary policy.
Such an eclectic approach enables the Federal Reserve and other central banks to use all the available information in conducting monetary policy. This tack may be especially important as market structures and economic processes change in ways that reduce the utility of any single indictor. However, a downside to such an approach is the difficulty it poses in communicating the central bank’s intentions to the public; the lack of a relatively simple set of procedures may make it difficult for the public to understand the actions of the Federal Reserve and to judge whether those actions are consistent with achieving its statutory goals. This downside risk can be mitigated if the central bank develops a track record of achieving favorable policy outcomes when no single guide to policy has proven reliable.
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The Federal Reserve System: Purposes and Functions
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