An important part of monetary policy is the monetary transmission mechanism, the process by which monetary policy actions influence the economy. While the transmission mechanism involves a number of channels, including exchange rates, bank credit, and asset prices, most economists consider...

It is generally believed that monetary policy actions are transmitted to the economy through their effect on market interest rates. According to this standard view, a restrictive monetary policy by the Federal Reserve pushes up both short-term and long-term interest rates, leading to less...

In response to continuing weakness in economic activity, the Federal Reserve has lowered its target for the overnight federal funds rate from 6½ percent to 1 percent over the past two and one-half years. Recently, concern has been expressed in the news media and among academic economists and...

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In principle, the monetary policy transmission mechanism can be described rather simply. When the Federal Reserve raises its target for the federal funds rate, other interest rates also rise—reducing interest-sensitive spending and slowing the economy. Conversely, when the federal funds rate...