Role of Federal Reserve

structure of the Fed

Twelve regional Federal Reserve Banks and their branch offices, The Board of Governors, The Federal Open Market Committee (FOMC)

expansionary monetary policy

buy securities OMO, decrease discount rate, decrease reserve ratio

changes in monetary policy

can lead to changes in the supply of money and the availability of credit and can influence overall levels of spending, employment, and prices in the economy.

Feds responsibilities

conducting monetary policy; supervising and regulating financial institutions; providing services to depository institutions, the federal government, and the public.

Federal Reserve System

often called the Fed, is the central banking system of the United States.

Fed tools

open market operations , discount rate, reserve ratio

the Fed supervises and regulates banks to

promote the safety and soundness of the banking system to foster stability in financial markets to ensure compliance with applicable laws and regulations.

open market operations

purchases and sales of government securities

interest rates influence

saving and spending decisions

contractionary monetary policy

sell securities OMO, increase discount rate, increase reserve ratio

Fed provides services

supplys paper money and coin to banks, processes checks and electronic payments, and protecting consumers through regulation and education

reserve ratio

the fraction of deposits that banks hold as reserves

discount rate

the rate charged on loans the Fed makes to banks (and other depository institutions)