c economic goals, the Board of Governors and the FOMC consider the record of US international transactions, movements in foreign exchange rates, and other international economic developments. And in the area of ​​bank supervision and regulation, innovations in international banking require continual assessments of, and occasional modifications in, the Federal Reserve s procedures and regulations. Federal Res erve formulates policies that shape, and are shaped by, international developments. It also participates directly in international affairs. For example, the Federal Reserve occasionally undertakes foreign exchange transactions aimed at influencing the value of the dollar in relation to foreign currencies, primarily with the goal of stabilizing disorderly market conditions. These transactions are undertaken in close and continuous consultation and cooperation with the US Treasury. The Federal Reserve also works with the Treasury and other government agencies on various aspects of international financial policy. It participates in a number of international organizations and forums and is in almost continuous contact with other central banks on subjects of mutual concern.Federal Reserve s actions to adjust US monetary policy are designed to attain basic objectives for the US economy. But any policy move also influences, and is influenced by, international developments. For example, monetary policy actions influence exchange rates. The dollar s exchange value in terms of other currencies is therefore one of the channels through which US monetary policy affects the US economy. If Federal Reserve actions raised US interest rates, for instance, the foreign exchange value of the dollar generally would rise. An increase in the foreign exchange value of the dollar, in turn, would raise the price in foreign currency of US goods traded on world markets and lower the dollar price of goods imported into the United States. By restraining exports and boosting imports, these developments could lower output and price levels in the economy. In contrast, an increase in interest rates in a foreign country could raise worldwide demand for assets denominated in that country s currency and thereby reduce the dollar s value in terms of that currency. Other things being equal, US output and price levels would tend to increase-just the opposite of what happens when US interest rates rise. Therefore, when formulating monetary policy, the Board of Governors and the FOMC draw upon information about and analysis of international as well as US domestic influences. Changes in public policies or in economic conditions abroad and movements in international variables that affect the US economy, such as exchange rates, must be factored into the determination of US monetary policy. , Economic developments in...
