Cambridge Business Association
Monetary Policy Report
Report

Monetary Policy Report

July 17, 2013

Board of Governors of the Federal Reserve System
Federal Reserve Board, 2013
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Editorial Rating

7

Qualities

  • Analytical
  • Overview

Recommendation

In its regular semiannual report to the US Congress, the Federal Reserve’s Board of Governors restates its statutory mission of supporting employment, price stability and long-term interest rates. The report summarizes economic and financial progress over the previous two quarters and offers the governors’ outlook for the next few years. In this latest installment, the Fed finds the US economy to be improving – albeit slowly and with the constraint of the sequestration that began in 2013 . The Fed also indicates the conditions that will determine how much longer it will continue its accommodative monetary policy. getAbstract recommends this official recap of the US and global economies to those looking for timely information from the US central bank.

Summary

The Federal Reserve’s Mission

The US Federal Reserve Act directs the Fed’s Board of Governors to give Congress a semiannual economic report. The Fed also must provide its assessment of prospects for the US economy. The Fed, operating through its Federal Open Market Committee (FOMC), has a legal obligation to promote “maximum employment, stable prices and moderate long-term interest rates.”

At FOMC meetings, the seven-member Board of Governors and the presidents of the 12 Federal Reserve Banks evaluate production, employment and inflation, and project the federal funds rate into the future. The impact that Fed decisions have on jobs, inflation and interest rates can trail short-term economic events, so Fed policy prescriptions target the medium and long term. The participants base their estimates on the available data and on their assessments and assumptions.

The Fed’s monetary policy and interest-rate setting can affect inflation. An inflation rate of 2% “is most consistent over the longer run with the Federal Reserve’s statutory mandate” and appears to be the right level at which to ensure price stability. The Fed announces this target to the market to “keep...

About the Author

The Board of Governors of the Federal Reserve is a central government agency that, along with 12 regional Federal Reserve Banks, forms the Federal Reserve System of the United States.

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