Federal Reserve System
Quoted or paraphrased from the Federal Reserve website.
The Federal Reserve System is the central bank of the United States. It performs five general functions:
1. Conducts nation’s monetary policy (goal: max employment and price stability)
2. Promotes stability of the financial systems (goal: reduce systemic risk)
3. Promotes the safety and soundness of individual financial institutions
4. Fosters payment and settlement system safety and efficiency
5. Promotes consumer protection and community development
Key entities:
A. Federal Reserve Board of Governors (Board of Governors)
B. 12 Federal Reserve Banks (Reserve Banks)
C. Federal Open Market Committee (FOMC)
The U.S. approach to central banking:
Rejects the concept of a single central bank. Instead, it provided for a central banking “system” with the key entities named above.
The Board of Governors is an agency of the federal government that reports to and is directly accountable to Congress. The Board of Governors provides guidance for the System and oversees Reserve Banks.
Monetary Policy:
The term "monetary policy" refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals. The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy.
The Federal Reserve controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the Federal Open Market Committee is responsible for open market operations. Using the three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.
Since 1936, the FOMC has annually selected the New York Fed to execute transactions for the System Open Market Account (SOMA)—the largest asset on the Federal Reserve's balance sheet—and issued a directive to the New York Fed's Open Market Trading Desk (the Desk) to undertake open market operations. The Desk executes operations as authorized and directed by the FOMC to achieve specific objectives, such as the target federal funds rate or a size or composition for SOMA securities holdings.
Structure of the FOMC
The Federal Open Market Committee (FOMC) consists of twelve members--the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis.
CLICK HERE FOR FOMC’s JULY 2022 RELEASE.
Click here for FOMC’s calendar for the future meetings, with links to past releases
2022 Committee Members:
Jerome H. Powell, Board of Governors, Chair
John C. Williams, New York, Vice Chair
Michael S. Barr, Board of Governors
Michelle W. Bowman, Board of Governors
Lael Brainard, Board of Governors
James Bullard, St. Louis
Susan M. Collins, Boston
Lisa D. Cook, Board of Governors
Esther L. George, Kansas City
Philip N. Jefferson, Board of Governors
Loretta J. Mester, Cleveland
Christopher J. Waller, Board of Governors