Moral Suasion
 |
Definition of 'Moral Suasion'A persuasion tactic used by an authority (i.e. Federal Reserve Board) to influence and pressure, but not force, banks into adhering to policy. Tactics used are closed-door meetings with bank directors, increased severity of inspections, appeals to community spirit, or vague threats. A good example of moral suasion is when the Fed Chairman speaks on the markets - his opinion on the overall economy can send financial markets falling or flying. |
 |
Investopedia explains 'Moral Suasion'Often termed simply 'suasion', it has been used to persuade banks and other financial institutions to keep to official guidelines. The 'moral' aspect comes from the pressure for 'moral responsibility' to operate in a way that is consistent with furthering the good of the economy. In Australia, the Reserve Bank has show preference for this type of policy control. In Japan, it is known as 'window guidance' and in the U.S., it is known as 'jawboning' - exercising the persuasive power of talk rather than legislation. |
Related Definitions
Articles Of Interest
-
What Are Central Banks?
They print money, they control inflation, and much, much more. All you need to know about central banks is here. -
The Federal Reserve
Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy. -
Leading Economic Indicators Predict Market Trends
Leading indicators help investors to predict and react to where the market is headed. -
Lessons Learned From the Banking Crisis
There are lessons to be learned on how to handle severe financial downturns, and while the Fed is learning, politicians may not be. -
Austerity: When The Government Tightens Its Belt
When a government tightens its belt in tough economic times the entire nation feels the squeeze. -
Breaking Down The Fed Model
Learn what pundits mean when they say that stocks are undervalued according to the Fed model. -
7 Misconceptions About The Federal Reserve
There are many fallacies about the Fed. The following misconceptions are among the most popular. -
The Link Between The Fed, Money, Debt And Taxes
Assets on the Fed's balance sheet, money supply level, national debt level and economic production should be maintained in equilibrium. -
A Primer On Inflation
Inflation has a negative connotation, but is it all bad or does it offer some tangible benefits? -
What is QE3 (quantitative easing)?
"Quantitative easing" refers to steps that the U.S. Federal Reserve takes in attempting to boost the country's lagging economy. Historically, the Fed's main tool for spurring growth has been ...
Free Annual Reports
