The Federal Reserve of the USA 🏦

The Federal Reserve of the USA (United States of America) is the central bank of the USA. Like we have the RBI as the central bank of India, the USA has the Federal Reserve. It is the U.S. central bank, created by the Federal Reserve Act of 1913. ‘The Fed’ is a popular short form for the Federal Reserve.

Fed prints the US dollar ?

The Fed prints US dollars, and it can print dollars at its will 🤑🤩💵💸💸. But it must take into account the economic and financial situation in the country and globally. Basically, there is a limit to it 😁

The aim to establish the Fed is to create a monetary system that responses effectively to stresses in the banking system. The way RBI regulates the banks and the banking system in India, The Fed does the same in the USA. The Fed regulates the banks and the overall banking system in the US.

The Fed is a statutory body (any institution/organization created by an act). It derives its powers from the act – ‘Federal Reserve Act’ of 1913.

Structure of The Federal Reserve 🏦💰💵

The Fed Reserve system includes –

• The board of Governors – A federal agency which has its Headquarters in Washington, D.C.
  • The Fed Chair heads the board of Gov. It also has a vice-chair.
• 12 Federal Reserve Banks around the USA.
• The 12 voting members from around the System of The Fed, who serve on the “Federal Open Market Committee” and help set crucial U.S. monetary policy.
• The Fed is an independent system. The decisions of the Fed are don’t need the President’s approval, or anybody else’s approval. The board of Gov. is a 7 membered body. The term of the members of the Board of Gov. is 14 years. They are nominated by the US President and confirmed in their posts by the senate.

Key Functions of The Fed –

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1. It decides & conducts the monetary policy of the U.S.
2. The Fed promotes the stability of the financial system of the country.
3. Supervises and regulates the financial institutions, like banks and non-banking financial institutions.
4. Fosters the safety of payments and settlement system.
5. Promotes awareness among the population about the consumer protection, finance and economy as a whole.
6. Printing of the US Dollar.

In India, RBI is responsible for the control of the inflation domestically. The same way, the Fed is responsible for the control of the domestic inflation in the USA. The “Federal Open Market Committee” decides the key policy rate, “The federal Funds rate” on the basis of the economic and financial conditions prevailing in the country. The Fed considers data related to the inflation, employment, etc.

The Open Market Committee meets 8 times a year. It announces the Fed rates through a press conference. Usually, The Fed chair announces the rates in that conference.

The decisions of the FEDERAL RESERVE impact the global economy and not just the US economy. The US dollar is the global currency. Its demand made it the global currency. The change in FED RATE automatically affects the supply of US dollar. The decisions of the Fed majorly impact the global markets.