Who Controls Monetary Policy?

controls-monetary-policy Credit: Mark Wilson/Getty Images News/Getty Images

In the United States of America, the Federal Reserve controls monetary policy. Stable employment, prices and long-term interest rates are the goals of monetary policy. The Federal Reserve uses monetary policy to avoid inflation and high interest rates by regulating the supply of money and credit available in the country.

Money and credit influences interest rates and the country's economic performance. The Federal Reserve uses open market operations, reserve requirements and the discount rate to control the economy. Open market operations involve government securities used to influence the supply of bank reserves. The discount rate is the interest rate charged to banks on short-term loans. A reserve requirement is the amount of money a bank must maintain in their vaults or on deposit with a Federal Reserve Bank.