What does the Federal Reserve mean when it says monetary policy is “accommodative” or “restrictive”?
In general, monetary policy is considered to be "accommodative" when it aims to make interest rates sufficiently low to spur strong enough economic growth to reduce unemployment or to prevent unemployment from rising. For example, in response to the sharp decline in economic activity and surge in job losses in early 2020 as a result of the COVID-19 pandemic and forceful measures to control its spread, the Federal Open Market Committee (FOMC) adopted an accommodative policy and quickly pushed short-term interest rates to near zero.
By contrast, monetary policy is considered to be "restrictive" when it aims to set interest rates at a sufficiently high level to put downward pressure on economic activity and inflation. For example, beginning in 2022, with inflation running well above 2 percent and the labor market extremely tight, the FOMC acted to raise the target range for the federal funds. Over the course of about a year and a half, the policy rate was raised by 5 1/4 percentage points to a restrictive stance.
To learn more about the Committee's assessment of the economic situation, its outlook for the economy, and its current stance of monetary policy, please read the FOMC's postmeeting statement, the FOMC Chair's postmeeting press conference statement and subsequent questions from reporters, or FOMC meeting minutes here: http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.