Learning what is the monetary policy and fiscal policy of the United States is essential to understanding how the country handles inflation, employment, and growth. An updated explanation of the US fiscal and monetary policies as of April 2025 is given here.
The Fed’s Role in the US Monetary Policy
The Federal Reserve (Fed) oversees the US monetary policy. It has two main goals:
- Price stability
- Maximum employment
The Fed’s dual mandate is commonly used to describe these objectives.
Current Interest Rate Landscape
The Federal Open Market Committee (FOMC) has established a target range for the federal funds rate as of early 2025, which is between 4.25% and 4.5%. This move comes after a 100 basis point rate drop in late 2024 in response to a stable labor market and moderate inflation.
Balancing Economic Development and Inflation
The Fed is monitoring economic data carefully, particularly in light of recent trade measures and concerns about the world economy. Even though inflation has dropped, it is still somewhat higher than the 2% objective. This is why the Fed is continuing to be cautious about making any rate changes.
Get the best CFO & business advisory services.
US Fiscal Policy: Government Spending and Taxation
In the US, Congress and the Administration make most of the government spending and taxation decisions. The Federal Reserve does not determine fiscal policy.
2025 Budget Initiatives
The House of Representatives approved a budget framework in April 2025 that backed President Trump’s ‘big, beautiful bill.’ The goals of this legislation are:
- Significant tax cuts
- Increased military and border security expenditure
- Revisions to energy, health, and social safety-net programs
Debates and Fiscal Challenges
Discussions over the projected budget’s possible effects on social programs and the federal deficit have been triggered. Critics worry about higher deficits and less money for basic services, while supporters claim it would boost economic development.
Get the best tax consultancy services in the US!
Monetary and Fiscal Policy Interaction
Fiscal and monetary policies function separately. However, they frequently impact one another. For example, the Fed considers inflation and economic growth when determining monetary policy, and excessive fiscal measures may affect both.
The FOMC evaluates fiscal changes regularly to see how they could affect the economy.
The Bottom Line
The US still uses its fiscal and monetary policies to negotiate challenging economic fluctuations. The Fed continues to take a cautious stance on interest rates. It balances employment and inflation. At the same time, the federal government is working on major budgetary projects that will change how taxes and spending are allocated.
L&Y Tax Advisor is at your service to help you learn what is the monetary policy and fiscal policy of the United States and their impact on the overall economic trajectory.
