The Fed in the US is extremely transparent. Its primary purpose is to control inflation and its primary tool is the fed funds rate. It adjusts the money supply to adjust the fed funds rate. But what is money? Is it M1, M2 or M3? If you look at data from the 90s, monetary aggregates have been all over the place eventhough inflation has been stable. Hence the consensus is that, with all the financial innovation inthe US, monetary aggregates dont make much sense in the short run. The very fact that the fed is able to control inflation by controlling the interest rates is proof enough for me thhat they done manipulate exchange rates. While US politicians are stupid, the fed is controlled by top rate economists, who know that undervaluing you currency is wasting your wealth!!
