Monetary Policy Topic Index

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Data Connections and Additional Resources
10 Year Treasury Bond Yield

The Federal Reserve System uses sales or buybacks of Treasury bonds as one of the ways in which it can control the money supply. For example, the Fed can expand the money supply by purchasing bonds, which places new money in the hands of those who sold the bonds to the Fed. Monetary policy determines prevailing interest rates in the money market by increasing or decreasing the supply of money, and thus the pace of economic growth.

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Civilian Unemployment Rate

A key goal of monetary policy is to maintain low rates of inflation. If the Federal Reserve concludes that economic conditions are favorable for accelerating inflation, such as when wage growth is outpacing productivity, then the Fed will move toward contractionary monetary policy. In contrast, expansionary monetary policy is far more likely when inflation pressures are light, but economic growth has slowed and unemployment rates have increased.

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Consumer Price Index (CPI)

A key goal of monetary policy is to maintain low rates of inflation. If the Federal Reserve concludes that economic conditions are favorable for accelerating inflation, such as when wage growth is outpacing productivity, then the Fed will move toward contractionary monetary policy. In contrast, expansionary monetary policy is far more likely when inflation pressures are light, but economic growth has slowed and unemployment rates have increased.

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Money Supply (M2)

The Federal Reserve conducts monetary policy by manipulating the money supply. Expansionary monetary policy increases the money supply to expand economic output, while contractionary monetary policy reduces the growth rate in the money supply to reduce spending and control inflation.

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