What are the goals of the Federal Reserve and how does the Federal Reserve attempt to control inflation? Why is low and steady inflation important?
Goals of Federal Reserve
Through monitory policy, the Federal Reserve aims to promote and create a better and stronger economy in the United States. The Federal Reserve conducts monitory strategies with an aim to support three goals. The first goal is to ensure that there is maximum and sustainable employment in the country. Federal Reserve has the mandate to provide that there are viable employment rates at the highest level which can be sustained in by the current economy while at the same time ensuring there are stable inflation rates. The second aim is to provide that there are stable prices in the market. While both the consumers and the business owners are not worrying about falling and the rising prices are when prices are considered to be stable. When there are stable prices, the long-term interest rates will be at moderate levels. The price stability and long-term interest rates go together. The last goals are to ensure that there is moderate and long-term interest rate (Rosengren and Eric, 23). Usually, these goals are referred to the Fed’s mandate. Through influencing the monitory policy mandates and the general financial conditions, the Federal Reserve can achieve its monitory policy mandate.
How does Federal Reserve control inflation?
Controlling inflation and avoiding recession is the primary job of Federal Reserve. The Federal Reserve can achieve this through monetary policy. By the use of contractionary monitory pol…
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