The Federal Reserve and Monetary Policy

Monetary policy

Central bank actions involving the use of interest rate or money supply tools to achieve such goals as maximum employment and stable prices.

Discount Rate

The interest rate the Federal Reserve charges on loans it makes to member banks.

Board of Governors

A federal government agency that is the centralized component of the Federal Reserve System. The governors guide the policy actions of the Federal Reserve System.

Quantitative easing

A monetary policy in which a central bank makes large-scale asset purchases designed to bolster financial market conditions.

Federal Reserve Bank

One of the 12 regional banks providing services to commercial banks, serving as fiscal agents for the U.S. government, and conducting economic research on its region and the nation.

Federal Reserve Act

The 1913 act of Congress establishing the Federal Reserve System.

Federal Open Market Committee (FOMC)

The Federal Reserve's chief body for conducting monetary policy, The FOMC consists of the Board of Governors and five Federal Reserve Bank presidents. Fed presidents rotate on and off the Committee at regular intervals.

Dual Mandate

The Federal Reserve's responsibility to use monetary policy to promote maximum employment and stable prices.

Open market operations

The buying and selling of government securities through primary dealers by the Federal Reserve to influence the money supply.

Federal Reserve System

The central bank system of the United States.

Federal funds rate

The interest rate at which a depository institution lends funds that are immediately available to another depository institution overnight.

Reserve Requirement Ratio

This monetary policy tool is used to determine the amount of deposits that banks must hold.

Federal Reserve Districts

Twelve regions in the United States that are represented by a Reserve Bank.