fed policy

Fed Policy

Fed policy refers to the actions and decisions of the Federal Reserve System in managing money, credit, and banking. The primary goal of Fed policy is to maintain price stability while achieving maximum sustainable economic growth. This means that it seeks to keep inflation low, unemployment low, and long-term interest rates at a level consistent with full employment (maximum output). To achieve this aim, policymakers must manage both monetary policy as well as fiscal policies like taxation levels or government spending.

Monetary Policy
The two main tools used by the Fed for implementing monetary policy are open market operations (OMO) and reserve requirement ratios. OMO involves buying or selling securities such as Treasury bills on the open market in order to influence short-term interest rates; whereas reserve requirement ratios refer to setting minimum reserves which banks need to hold against deposits they accept from customers – increasing these requirements makes it more difficult for banks lend out funds thereby reducing liquidity in financial markets. Additionally, other instruments may also be employed such as lowering/raising discount rate charged when borrowing directly from central bank or adjusting margin requirements imposed on certain types of loan products offered by commercial banks etc., all intended towards influencing overall macroeconomic environment within US economy .

Fiscal Policies
In addition to its role in conducting monetary policies discussed above ,the federal government has responsibility over fiscal policies including taxes & subsidies that affect how much people spend & save their income thus impacting aggregate demand generated within US economy . Fiscal measures can include tax credits for businesses investing into technology upgrades , incentives given based on job creation criteria set forth by particular state governments among many others . Depending upon situation faced by nation’s economy , these sorts of initiatives help drive GDP higher either through direct investment impact made via newly created jobs / improved infrastructure projects funded partially using public resources or indirectly through consumer confidence boosting effect produced due rising real wages received after taking into account lower taxation levels implemented across board etc..