Most central banks conduct monetary policy by setting targets for overnight interest rates. During the 1990s, central banks have tended to move these interest rates in small steps without reversing direction quickly, a practice called interest rate smoothing. For example, the majority of Federal...

In the spring of 2004, there was widespread expectation in financial markets that the Federal Reserve would shortly begin the process of raising its federal funds rate target back toward a more normal level. At the time, there was considerable concern that removing policy accommodation could...

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...