Economic Outlook of Lithuania

Monetary Policy is the procedure by which the financial expert of a nation, similar to the national bank or cash board, controls the supply of money. Regularly focusing on a inflation rate or interest rate to guarantee value solidness and general trust in

Central banks intervene in foreign exchange markets by “influencing the monetary funds transfer rate of a nation’s currency” with the purpose of building reserves, keeping the exchange rate stable, to correct imbalances, to avoid volatility and keep credibility. It implies changing the value of a currency against another one. It creates demand or supply of a currency by buying or selling the country’s currency in the foreign exchange market. (Foreign Exchange Intervention)

This role is achieved through the implantation of the monetary policies. According to Arnold (2008), Fed has several tools at it disposal that it uses in the monetary polices. These are; the open market operations which involve buying and selling U.S government securities in the financial markets. Further the bank is charged with the responsibility of determining the required reserve ratio. This ratio is given to the commercial banks dictating the minimum amounts that they should hold in to their accounts as deposits and for lending. Finally the Fed sets the discount rates putting in to consideration the overall market rates s well as desired effect on borrowing that the Fed seeks to achieve. In addition to these three major roles, as a bank, the Federal Reserve Bank can play the roles played by the commercial banks as the rules are not entirely prohibitive as far as this duty is concerned.

The Federal Reserve is the single entity in control of the monetary policy of the United State of America. Monetary policy is the process that the Federal Reserve takes in order to control the supply of money and to attempt the control the direction of interest rates. The reason for doing these actions is in attempt to control the country’s inflation and employment rates, which are the biggest indicators and factors of a healthy economy.

To be more precise in the way the monetary policy works, it is under three implements that define its functions: open market operations, changes in the discount rate, and changes in the required reserve ratio. These are the functions that provide the Federal Reserves (the Fed) the ability to change the money supply in our economy. It is a matter of actions taken to maintain our country in the best way possible and, of course, stability comes with a price. With things like supporting our troops in other countries, like Iraq and Afghanistan, a cut in tax rates, and increases in overall spending, it adds up to where we have spent more than we have collected in revenue (Fix the

When economists think of monetary policy implementation they primarily focus on instruments, operating targets, intermediate targets, and policy goals. Instruments are the variables directly controlled by the central bank(Flandreau, 2007). These contain, an interest rate charged on reserves borrowed from the central bank, the reserve requirement ratios that govern the level of reserves banks must hold against their deposit liabilities, and the composition of the central bank’s own balance sheet. The instruments of policy are employed to accomplish a

Conducting the nation's monetary policy by influencing the money and credit conditions in the economy in pursuit of full employment and stable prices.

The CB uses open market operations to buy and sell securities as a means of implementing their monetary policies. They also used the open market operations as a way to control the liquidity of available money by influencing the short term interest and the supply of base money; therefore as a result controlling the supply of money. They also set the target rate for the feds and setting the discount rate at which for member banks to lend money to each other. The Feds also evaluate the bank mergers and also implements foreign exchange policy on behalf of US government and the

In order for the Federal Reserve to fulfill their goal of moderate long term interest rates, stable prices and maximum employment, they rely on developing strategic changes to the monetary policy. Through monetary policy changes, the Federal Reserve can either restrict or encourage economic growth and inflation, thereby molding the macroeconomy into a state of consistent health. Overall, there are three tools used to modify the monetary policy, they include reserve requirements, discount rates, and open market operations. In an effort to promote price stability within the economy, these tools influence monetary conditions by affecting interest rates, credit availability, money supply and security prices. While one tool is use more frequently than the others, all three are necessary in establishing stable economic conditions.

One form of direct control can be exercised by adjusting the legal reserve ratio (the proportion of its deposits that a member bank must hold in its reserve account), and as a result, increasing or decreasing the amount of new loans that the commercial banks can make. Because loans give rise to new deposits, the possible money supply is, in this way, expanded or reduced. This policy tool has not been used too much in recent years. The money supply may also be influenced through manipulation of the discount rate, which is the rate if interest charged by the Federal Reserve banks on short-term secured loans to member banks. Since these loans are typically sought to maintain reserves at their required level, an increase in the cost of such loans has an effect similar to that of increasing the reserve requirement. The classic method of indirect control is through open-market operations, first widely used in the 1920s and now used daily to make some adjustment to the market. Federal Reserve bank sales or purchases of securities on the open market tend to reduce or increase the size of commercial bank reserves. When the Federal Reserve sells securities, the purchasers pay for them with checks drawn on their deposits, thereby reducing the reserves of the banks on which the checks are drawn. The three instruments of control explained above have been conceded to be more effective in preventing inflation in times of high economic activity than in bringing about revival from a

As president of the United States, the public often believes that the nation’s leader can control the economy. However, while the president may have some influence over the economy, having control over the economy is far from truth. In fact, more often than not a president’s influence over the economy is more subtle and difficult to measure until years after the president has left office. The president is given the responsibility of appointing members of the Federal Reserve Board who are subsequently approved by the Senate. The Federal Reserve Board is responsible for much of the monetary policy which governs the central banking system if the United States controlling interest rates, the money supply, and overseeing the Nation’s banking system

Monetary policy is the domain of a nation’s central bank. The Federal Reserve System (commonly called the Fed) in the United States and the Bank of England of Great Britain are two of the largest such “banks” in the world. Even though there are some differences between the two, the basis of their operations are almost exact and are also effective for highlighting the various measures that can constitute monetary policy.

Monetary policy consists of specific changes in the money supply to influence interest rates which in return adjusts the level of spending in the economy. The goal of the policy is to achieve and maintain price stability, full employment, and economic growth. The regulation of the money supply and interest rates are controlled by a central bank, such as the Federal Reserve Board in the U.S., in order to control inflation. Monetary policy is only one of the two ways the government can affect the economy. By altering the effective cost of money, the Federal Reserve can ultimately change the amount of money that is spent by consumers and businesses.

Monetary Policy, in the United States, is the process by which the Federal Reserve controls the money supply to promote economic growth and stability. It is based on the relationship between interest rates of the economy and the total supply of money. The Federal Reserve uses a variety of monetary policy tools to control one or both of these.

Monetary policy is the mechanism of a country’s monetary authority (usually the central bank) taking up measures to regulate the supply of money and the rates of interest. It involves controlling money in the economy to promote economic