You might have heard the statement FED/Federal reserve has increased the interest rates. In the last post, we tried to look at the implications of Interest rate hikes. But many people would be wondering what FED is in the first place.

FED short for The Federal Reserve System is the central bank of the United States and is the most powerful economic institution in the US.

🎯 Role of Federal Reserve:

🌟 Government’s Bank:
🔽 Currency Issue
🔽 Tax receipt collection

🌟 Banker’s bank:
🔽 Regulator for all the banks in the US
🔽 Lender of last resorts (Bails other banks in case of financial distress)

🎯 Goals of Federal Reserve:

🔽 Full Employment
🔽 Interest Rate Stability
🔽 Exchange Rate Stability
🔽 Growth in the economy
🔽 Inflation curtailment

🎯 Structure of Federal Reserve:

🔽 Federal Reserve Bank
🔽 Board of Governors (7 in the number) maintain effective oversight of Reserve
🔽 Federal Open Market Committee (FOMC) holds meetings to review economic
and financial conditions that determine the appropriate monetary policy

The FOMC is a 12-member committee that produces a Balance of Risk statement and maintains a balance between growth and inflation.

Federal Reserve System aims to provide the nation with a safer, more flexible and more stable monetary and financial system. They influence money and credit conditions in the economy in pursuit of full employment and price stability.

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