Presentation by Steve Meyer, Senior Adviser, Federal Reserve Board of Governors. January 14, 2011 From the Federal Reserve: www.federalreserve.gov Hello, I’m Steve Meyer. I’m an economist here at the Federal Reserve in Washington. The Fed is the central bank of the United States, the Congress created the Fed and made it responsible for monetary policy. I’m going to spend a few minutes discussing monetary policy and recent steps the Fed has taken to support our nation’s economic recovery. The Fed adjusts monetary policy to promote maximum sustainable growth in output and employment and to keep inflation low and stable. When the outlook for growth is too slow and unemployment is high the Fed can push interest rates down to make credit less expensive that helps the economy grow more quickly and create more jobs. If inflation is extremely low, pushing interest rates down can help prevent the dangerous of slide into deflation, meaning a continuing decline in prices in wages. But if inflation is rising and the economy is growing too strongly the Fed can push up interest rates to reign in growth and control inflation. In normal times, before the recent global financial crisis the Fed adjusted short term interest rates such as the rate at which banks lend to each other over night. To make those adjustments the Fed bought and sold US government bonds, notes, and bills. Longer term interest rates including those on home mortgages, auto loans, and business credit generally moved up …
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