The Economy & the Fed

Monetary Policy

What a central bank does to steer the economy by managing interest rates and the amount of money in the system. Tight (or restrictive) policy raises rates and drains money to fight inflation; easy (or accommodative) policy lowers rates and adds money to support growth. The Federal Reserve’s tools are open market operations — buying or selling government securities, its most-used tool, where buying adds money and selling removes it — plus the discount rate it charges banks, the reserve requirement banks must hold, and the interest it pays on banks’ reserves. It is separate from fiscal policy, which is taxes and government spending set by Congress.

Educational information, not investment advice. See it applied across the screener →