Question

Please describe the Fed's current monetary policy and what step they took at the most recent Federal Open Market Committee meeting?

Answer 1

Explanation of the federal current monetary policy are as follows :

The Fed’s control over monetary policy stems from its exclusive ability to alter the money supply and credit conditions more broadly. Normally, the Fed conducts monetary policy by setting a target for the federal funds rate, the rate at which banks borrow and lend reserves. It meets its target through open market operations, financial transactions traditionally involving U.S. Treasury securities. Beginning in 2007, the federal funds target was reduced from 5.25% to a range of 0% to 0.25% in December 2008, which economists call the zero lower bound. By historical standards, rates were kept unusually low for an unusually long time to mitigate the effects of the financial crisis.

A joint meeting of the Federal Open Market Committee and the Board of Governors was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C,on Tuesday, January 29, 2019, at 10:00 a.m. and continuedon Wednesday, January 30, 2019, at 9:00 a.m

Taken steps in federal Open market committee on various aspects.

Standlone spot and forward transactions

The Committee authorizes the Subcommittee to direct the Selected Bank in advance to execute the operation if it would result in the overall volume of standalone spot and forward transactions.

To increase the funds rate 2.25 to 2.50 %

The Federal Open Market Committee directs the Desk tounder-take open market operations as necessary to maintain the federal funds rate in a target range of 2.25 % to 2.50 % percent.

The Committee directs the Desk to continue rolling over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing during each calendar month that exceeds $30 billion.

Steps taken on Expansion

The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes.