How should I respond ; Excellent post! The Federal Reserve decision of changing the money supply (the total amount of money in circulation) disclosed in changes in the reserve of commercial banks, utilizing tools of open market operation, federal funds rate, and the reserve requirements. In addition, Fed impacts commercial banks reserves and their lending capabilities by buying or selling bonds in open market operation. The FOMC's primary means of adjusting the stance of monetary policy is by changing its target for the federal funds rate which is the interest rate that the commercial banks pay to borrow reserve balances overnight which then rapidly affect the market interest rates. For further reading, please see FOMC Longer-Run Goals and Monetary Policy Strategy (PDF) http://www.econlib.org/library/Enc/MonetaryPolicy.html