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The term "monetary policy" refers to the actions undertaken by a central bank, such as to influence the availability and cost of money and credit to help promote national economic goals.
The Central Bank controls the three tools of monetary policy--open market operations,
the discount rate, and
reserve requirements. The Board of Governors of the
Royal Central Bank System is responsible for the discount rate and reserve requirements, and the
:Nyan-ko-pong: Open Market Committee is responsible for open market operations. Using the three tools, the
Royal Central Bank influences the demand for, and supply of, balances that depository institutions hold at
Royal Central Bank and in this way alters the reserve funds rate. The reserve funds rate is the interest rate at which depository institutions lend balances at the
Royal Central Bank to other depository institutions overnight.
Changes in the funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services.
Structure of the N.O.M.C
The :Nyan-ko-pong: Open Market Committee (N.O.M.C) consists of twelve members--the seven members of the Board of Governors of the
Royal Central Bank System; the president of the Royal Reserve Bank of Xaymaca; and four Royal Reserve Bank Board Members, who serve one-year terms on a rotating basis. Nonvoting
Royal Reserve Bank Board Members attend the meetings of the Committee, participate in the discussions, and contribute to the Committee's assessment of the economy and policy options.
The N.O.M.C holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
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