What is the goal of monetary policy?
In the United States, monetary policy is the business of the Federal Reserve Bank. This agency seeks to control inflation and stimulate economic growth by controlling the supply of money.MechanismThe Federal Reserve Bank controls the supply of money by setting interest rates. The federal funds rate is the interest that the Federal Reserve charges banks to borrow. Interest rates charged by banks for business loans, personal loans and mortgages generally follow the lead of the Federal Reserve.Interest RatesGenerally, low interest rates mean easy credit and more money in circulation. Higher interest rates slow the circulation of money and thus slow down credit and business activity.InflationThe Federal Reserve’s monetary policy is an attempt to control inflation or growth in the amount of money in circulation that brings about rising prices and wages. When inflation starts to rise, the Federal Reserve will raise its interest rate.Economic GrowthMonetary policy also tries to stimulate econ
