Board of Governors of the Federal Reserve System

What is the basic legal framework that determines the conduct of monetary policy?

The Congress established a basic legal framework for the conduct of monetary policy that involves three key pillars:

1. statutory long-run economic objectives for the conduct of monetary policy--maximum employment and stable prices
2. a structure for the Federal Reserve System that provides for a significant degree of operational independence in the conduct of monetary policy
3. mechanisms to ensure appropriate transparency and accountability of the Federal Reserve in the conduct of monetary policy

This basic framework of statutory objectives, operational independence, and mechanisms to ensure transparency and accountability now governs the conduct of monetary policy by all major central banks around the world and is commonly viewed as a best practice for central banking.