Knowledge Base
What is a rules-based monetary policy?
A rules-based policy is a monetary policy in which a central bank rarely deviates from established norms. It does not make exceptions based upon extenuating circumstances. However, it does provide flexibility for the central bank to adjust to economic developments, but in a predictable way, thereby creating transparency and allowing businesses, families, and workers to long-term economic decisions without worrying about what the central bank might do in the future.
What is a free market?
In a free market, the price of good and services is governed by the forces of supply and demand and not manipulated by government policies. Voluntary exchange, where buyers and sellers make mutually beneficial deals without interference, are the norm.
What is the Federal Reserve?
The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.
The Federal Reserve conducts the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices. It also supervises and regulates banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system, and to protect the credit rights of consumers. It maintains the stability of the financial system and provides certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions.