Question

Since Deregulation beginning in 1980, Discuss the role of Federal Reserve:

Answer 1

The Federal Open Market Committee (FOMC), the Fed's monetary policy-making group, targets to "promote in an efficient practice, the goals of maximum employment, stable prices, and moderate long-term interest rates" when managing policy.

The FOMC altered its strategy to monetary policy and commenced to target the amount of money; particularly nonborrowed resources. It was considered that targeting the level of nonborrowed reserves was a more useful approach to restraining inflation, which had increased to very high levels in the mid- and late-1970s. FOMC members anticipated that the new procedure to monetary policy would produce greater volatility in the fed funds rate. This was indeed the result, and the average fed funds rate fluctuated greatly between 1979 and 1982.