ABSTRACT
This chapter starts with a bit of U.S. central bank history and advances through a range of topics from monetary policy goals, theories, and rules for guiding monetary policy. The independence of central banks from government fiscal policy is largely embraced by advanced economies and assumed in the chapter discussion, but central bank policy was and is not always truly independent. Some recent controversies are discussed, as well, such as are the Federal Reserve's mandates being blurred and should monetary policy incorporate social objectives. Keep in mind that the Federal Reserve Board has five key functional areas: (1) monetary policy, (2) financial stability, (3) supervision and regulation, (4) payment system and Reserve Bank oversight, and (5) consumer and community affairs. The Fed's regulatory, supervisory, and community roles are not dwelled on in this chapter, but important. This chapter also covers yield-curve control as a monetary policy instrument that has not been actively used by the Federal Reserve at present (only implicitly or passively as a result of the Fed's LSAPs), it remains a new tool that central banks may use (and is used already by the Bank of Japan). Another nascent issue for monetary authorities, which readers need to know about, is central bank digital currency (CBDC)—which will be discussed increasingly in the coming years. Readers will learn in this chapter:
