MONETA RY POLICY WITHIN THE FEDERAL RESERVE SYSTEM IN THE FUNCTION OF ECONOMIC POLICY OBJECTIVES
MONETA RY POLICY WITHIN THE FEDERAL RESERVE SYSTEM IN THE FUNCTION OF ECONOMIC POLICY OBJECTIVES

Summary/Abstract: The competences and responsibilities of the Federal Reserve System include the implementation of monetary policy, thus affecting the money and credit conditions in the economy, in order to achieve full employment and price stability. The objectives of monetary policy are defined in the Federal Reserve Act, which states that the Board of Governors and the Federal Commission for its open market operations should promote full employment, stable prices and moderate long-term interest rates. Stable prices are a prerequisite for long-term sustainable growth in output and employment, as well as moderate long-term interest rates. Stable prices of goods, services, materials and labor are in efficient allocation of resources and thereby contribute to increasing living standards, encourage saving and capital formation, because when the risk of decline in value of assets due to inflation is minimal, households are encouraged to save more, and entrepreneurs to invest more.

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