Federal Reserve FAQs

What is a regulation and how is it made?

A regulation is a set of requirements issued by a federal government agency to implement laws passed by Congress. When the Board issues a regulation, it follows the same basic process required of all federal agencies. In general, a federal agency first proposes a regulation and invites public comments on it. The agency then considers the public comments and issues a final regulation, which may include revisions that respond to the comments.

How does the globalization of financial markets affect the ability of the Federal Reserve to promote macroeconomic and financial stability?

As financial markets around the world have become more tightly integrated, financial conditions within the United States have become increasingly subject to influences from beyond our borders. To make effective policy, the Federal Reserve must have as full an understanding as possible of the factors determining financial conditions, economic activity, and inflation in the U.S. economy, whether those influences originate at home or abroad. Consequently, one direct effect of globalization on Federal Reserve operations has been to increase the time and attention devoted to following and understanding developments in other economies, the world trading system, and global capital markets. However, globalization has not materially affected the ability of the Federal Reserve to influence financial conditions in the United States. Through its ability to influence interest rates, the Fed retains the capacity to affect the cost of credit to U.S. households and firms. Moreover, the breadth and transparency of U.S. financial markets reduce their vulnerability to disruptions in foreign markets. Finally, globalization does not appear to have led to significant changes in the factors that determine U.S. inflation. That said, the Federal Reserve continues to place a high priority on understanding the effects of globalization on the U.S. economy in general and on the conduct and transmission of U.S. monetary policy in particular.

How does the Federal Reserve Board determine how much currency to order each year?

As the issuer of Federal Reserve notes, the Federal Reserve Board places an order for currency from the U.S. Treasury Department's Bureau of Engraving and Printing every year. The print order is broken out by denomination. We decide how much of each denomination to order based on how much demand we expect how much currency we expect that Reserve Banks will destroy because the notes are unfit to circulate, and other factors, such as inventory management or the issuance of a new design We use the majority of new notes printed each year to replace unfit notes that Reserve Banks have removed from circulation. For example, we estimate that in 2015, 85 percent of the new notes printed will replace destroyed currency, while the remaining 15 percent will meet increased public demand.

What is the Federal Reserve's implementation note and how does it differ from the FOMC's postmeeting statement?

Beginning with the December 2015 Federal Open Market Committee (FOMC) meeting, the Federal Reserve began publishing an implementation note along with the FOMC statement. The implementation note provides important details about how the Federal Reserve's policy tools are being used to keep the federal funds rate in the target range established by the FOMC. This information should help increase public awareness and understanding about the normalization of monetary policy. The implementation note communicates the operational settings of the Federal Reserve's policy tools, including the interest rate paid on required and excess reserve balances, the offering rate on the Federal Reserve's overnight reverse repurchase agreements (ON RRPs), and the capacity of the ON RRP facility. In addition, the implementation note reports the primary credit rate charged on borrowing from the discount window. The implementation note also includes the directive to the Open Market Desk for the conduct of open market operations for the intermeeting period.

What is the difference between a bank's liquidity and its capital?

Capital and liquidity are distinct but related concepts. Each plays an essential role in understanding a bank's viability and solvency. Liquidity is a measure of the ability and ease with which assets can be converted to cash. Liquid assets are those that can be converted to cash quickly if needed to meet financial obligations; examples of liquid assets generally include cash, central bank reserves, and government debt. To remain viable, a financial institution must have enough liquid assets to meet its near-term obligations, such as withdrawals by depositors. Capital acts as a financial cushion to absorb unexpected losses and is the difference between all of a firm's assets and its liabilities. To remain solvent, the value of a firm's assets must exceed its liabilities. A typical family's household finances help to illustrate the differences between these two concepts. On the liquidity side, money in a family's checking account can be used to quickly and easily pay its bills, so a gauge of the family's liquidity position would include how much money is in the checking account as well as how much cash the family has on hand. On the capital side, the family's assets include not just the money in the checking account, but also its home, savings accounts, and other investments. The family debt, or money it owes, such as a mortgage, are its liabilities. So the difference between the family's debt and its assets would provide a measure of the family's capital position. Over time, banks have failed or required government assistance because they had inadequate capital, a lack of liquidity, or a combination of the two. The Federal Reserve since the financial crisis has worked to increase the levels of both liquidity and capital at banking organizations. The Federal Reserve implemented the Basel III Liquidity Coverage Ratio in September 2014, which was formulated with other U.S. and global regulators and requires large firms to hold levels of liquid assets sufficient to protect against constraints on their funding during times of financial turmoil. The Federal Reserve has implemented the Basel III capital standards, which also were formulated with other U.S. and global regulators. Also, through the Federal Reserve's annual stress tests and capital planning processes, large financial institutions are required to hold enough capital to absorb losses in a severely adverse economic environment and continue to lend to households and businesses. For the largest banks, the amount of high-quality capital they hold has more than doubled from the end of 2008 to the end of 2012, in part as a result of these efforts.

How much does it cost to produce currency and coin?

Currency Each year, the Federal Reserve Board projects the likely demand for new currency, and places an order with the Department of the Treasury's Bureau of Engraving and Printing, which produces U.S. currency and charges the Board for the cost of production. The 2018 currency budget is $861.7 million Coin Annual coin production is determined by the U.S. Mint. Reserve Banks influence this process by providing the Mint with monthly coin orders and a 12-month, rolling coin-order forecast. Reserve Banks purchase coin at face value from the Mint.

What is the lowest level of unemployment that the U.S. economy can sustain?

Even in good times, a healthy, dynamic economy will have at least some unemployment as workers switch jobs, and as new workers enter the labor market and other workers leave it. The lowest level of unemployment that the economy can sustain is difficult to determine and has probably changed over time due to changes in the composition of the labor force, and changes in how employers search for workers and how workers search for jobs. Many estimates suggest that the long-run normal level of the unemployment rate--the level that the unemployment rate would be expected to converge to in the next 5 to 6 years in the absence of shocks to the economy--is in a range between 4 percent and 5 percent. Policymakers' judgments about the long-run normal rate of unemployment in the Summary of Economic Projections are generally in this range as well. For example, in the June 2018 projections, FOMC participants' estimates of the longer-run normal rate of unemployment ranged from 4.1 to 4.7 percent.

Is U.S. currency still backed by gold?

Federal Reserve notes are not redeemable in gold, silver, or any other commodity. Federal Reserve notes have not been redeemable in gold since January 30, 1934, when the Congress amended Section 16 of the Federal Reserve Act to read: "The said [Federal Reserve] notes shall be obligations of the United States....They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank." Federal Reserve notes have not been redeemable in silver since the 1960s. The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation. This collateral is chiefly held in the form of U.S. Treasury, federal agency, and government-sponsored enterprise securities.

What is financial stability?

Financial stability is about building a financial system that can function in good times and bad, and can absorb all the good and bad things that happen in the U.S. economy at any moment; it isn't about preventing failure or stopping people or businesses from making or losing money. It is just helping to create conditions where the system keeps working effectively even with such events.

What is the Summary of Economic Projections?

Four times a year, the Federal Reserve releases a summary of Federal Open Market Committee (FOMC) participants' projections for GDP growth, the unemployment rate, inflation, and the appropriate policy interest rate. The summary also provides information regarding policymakers' views on the uncertainty and risks attending the outlook. The projections provide information on the values that participants view as the most likely to prevail in the current year and the subsequent two years as well as over the longer run. The Chair presents information about these projections in the press conference following the FOMC meeting for which they were prepared. The complete Summary of Economic Projections, which includes a narrative description of the projections, is released as an addendum to the minutes of the FOMC meeting.

What is the statement on longer-run goals and monetary policy strategy and why does the Federal Open Market Committee put it out?

In January 2012, the Federal Open Market Committee (FOMC) first published a "Statement on Longer-Run Goals and Monetary Policy Strategy." The Committee has reaffirmed the Statement each January since then. The publication of a statement on longer-run goals helps hold the Fed accountable; it also helps the public understand how the FOMC interprets its statutory mandate to promote maximum employment and stable prices.

Why did the Federal Reserve begin raising interest rates after seven years of keeping them near zero?

In March 2015, the FOMC indicated in its postmeeting statement that it anticipated that it would be appropriate to raise the target range for the federal funds rate when it had seen further improvement in the labor market and was reasonably confident that inflation would move back to its 2 percent objective over the medium term. In December 2015, the Committee judged that both of those tests had been met. Given the outlook for the economy and the fact that it takes time for policy actions to affect future economic outcomes, the Committee decided to raise its target for policy interest rates. The Committee noted in its statement that monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

How does the Federal Reserve's buying and selling of securities relate to the borrowing decisions of the federal government?

In financing the federal deficit, the federal government borrows from the public by issuing Treasury securities which are sold at auction according to a schedule that is published quarterly. The Treasury determines the types and amounts of Treasury securities sold at auction with the goal of achieving the lowest financing costs for the federal government over time. The Federal Reserve does not participate in competitive bidding at Treasury auctions, and the Treasury's debt management decisions are not influenced by the Federal Reserve's purchases of Treasury securities in secondary markets.

What does the Federal Reserve mean when it says monetary policy remains "accommodative"?

In general, monetary policy is considered to be "accommodative" when it aims to make interest rates sufficiently low to spur strong enough economic growth to reduce unemployment or to prevent unemployment from rising. For example, toward the end of 2008, in the midst of the global financial crisis and Great Recession, with unemployment above 6-1/2 percent and rising, and inflation below 2 percent and expected to decline, the Federal Open Market Committee (FOMC) pushed short-term interest rates to nearly zero. The FOMC then embarked on a series of large-scale asset purchase programs to reduce longer-term interest rates.

What is forward guidance and how is it used in the Federal Reserve's monetary policy?

In today's interconnected world, many central banks communicate regularly and frequently with the public about the state of the economy, the economic outlook, and the likely future course of monetary policy. Communication about the likely future course of monetary policy is known as "forward guidance." When central banks provide forward guidance about the future course of monetary policy, individuals and businesses will use this information in making decisions about spending and investments. Thus, forward guidance about future policy can influence financial and economic conditions today.

What is inflation and how does the Federal Reserve evaluate changes in the rate of inflation?

Inflation occurs when the prices of goods and services increase over time. Inflation cannot be measured by an increase in the cost of one product or service, or even several products or services. Rather, inflation is a general increase in the overall price level of the goods and services in the economy. Federal Reserve policymakers evaluate changes in inflation by monitoring several different price indexes. A price index measures changes in the price of a group of goods and services. The Fed considers several price indexes because different indexes track different products and services, and because indexes are calculated differently. Therefore, various indexes can send diverse signals about inflation.The Fed often emphasizes the price inflation measure for personal consumption expenditures (PCE), produced by the Department of Commerce, largely because the PCE index covers a wide range of household spending. However, the Fed closely tracks other inflation measures as well, including the consumer price indexes and producer price indexes issued by the Department of Labor. When evaluating the rate of inflation, Federal Reserve policymakers also take the following steps. First, because inflation numbers can vary erratically from month to month, policymakers generally consider average inflation over longer periods of time, ranging from a few months to a year or longer. Second, policymakers routinely examine the subcategories that make up a broad price index to help determine if a rise in inflation can be attributed to price changes that are likely to be temporary or unique events. Since the Fed's policy works with a lag, it must make policy based on its best forecast of inflation. Therefore, the Fed must try to determine if an inflation development is likely to persist or not. Finally, policymakers examine a variety of "core" inflation measures to help identify inflation trends. The most common type of core inflation measures excludes items that tend to go up and down in price dramatically or often, like food and energy items. For those items, a large price change in one period does not necessarily tend to be followed by another large change in the same direction in the following period. Although food and energy make up an important part of the budget for most households--and policymakers ultimately seek to stabilize overall consumer prices--core inflation measures that leave out items with volatile prices can be useful in assessing inflation trends.

Federal Open Market Committee (FOMC) meetings are not open to the public, so how do I know what the FOMC is doing?

Information about the Federal Open Market Committee's (FOMC) deliberations and decisions can be found in: policy statements released after each FOMC meeting detailed minutes of FOMC meetings, released three weeks after each regularly scheduled meeting Chair Yellen's quarterly press conferences quarterly publication of the economic projections of FOMC participants semiannual and other testimony by the Chair to the Congress on monetary policy weekly disclosure of the Federal Reserve's balance sheet and discount window lending

Why do interest rates matter?

Interest rates matter in many different ways that affect the U.S. economy. One way that interest rates matter is they influence borrowing costs. Lower interest rates, for example, would encourage more people to obtain a mortgage for a new home or to borrow money for an automobile or for home improvement. Lower rates also would encourage businesses to borrow funds to invest in expansion such as purchasing new equipment, updating plants, or hiring more workers. Higher interest rates would restrain such borrowing by consumers and businesses.

What is macroeconomics?

Macroeconomics is the study of whole economies--the part of economics concerned with large-scale or general economic factors and how they interact in economies. The Federal Reserve closely examines macroeconomics because its goals--maximum sustainable employment and stable inflation--are measured and achieved on an economy wide level, not on an individual level

What is the role of Board members when the Federal Reserve Board issues a regulation?

Members of the Board vote on whether to approve the issuance of each proposed and final regulation of the Federal Reserve Board.

What is the difference between monetary policy and fiscal policy, and how are they related?

Monetary policy is a term used to refer to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth. In the United States, the Congress established maximum employment and price stability as the macroeconomic objectives for the Federal Reserve; they are sometimes referred to as the Federal Reserve's dual mandate. Apart from these overarching objectives, the Congress determined that operational conduct of monetary policy should be free from political influence. As a result, the Federal Reserve is an independent agency of the federal government. Fiscal policy is a broad term used to refer to the tax and spending policies of the federal government. Fiscal policy decisions are determined by the Congress and the Administration; the Federal Reserve plays no role in determining fiscal policy. The Federal Reserve uses a variety of policy tools to foster its statutory objectives of maximum employment and price stability. Its main policy tools is the target for the federal funds rate (the rate that banks charge each other for short-term loans), a key short-term interest rate. The Federal Reserve's control over the federal funds rate gives it the ability to influence the general level of short-term market interest rates. By adjusting the level of short-term interest rates in response to changes in the economic outlook, the Federal Reserve can influence longer-term interest rates and key asset prices. These changes in financial conditions then affect the spending decisions of households and businesses. The monetary policymaking body within the Federal Reserve System is the Federal Open Market Committee (FOMC). The FOMC currently has eight scheduled meetings per year, during which it reviews economic and financial developments and determines the appropriate stance of monetary policy. In reviewing the economic outlook, the FOMC considers how the current and projected paths for fiscal policy might affect key macroeconomic variables such as gross domestic product growth, employment, and inflation. In this way, fiscal policy has an indirect effect on the conduct of monetary policy through its influence on the aggregate economy and the economic outlook. For example, if federal tax and spending programs are projected to boost economic growth, the Federal Reserve would assess how those programs would affect its key macroeconomic objectives--maximum employment and price stability--and make appropriate adjustments to its monetary policy tools.

Do I have to trade in my old-design notes when a new one begins circulating?

No, you do not have to trade in your old-design notes for new ones. All U.S. currency remains legal tender, regardless of when it was issued.

Is the Federal Reserve Act going to expire?

No. The Federal Reserve Act of 1913--which established the Federal Reserve as the central bank of the United States--originally chartered the Federal Reserve Banks for 20 years. But in the McFadden Act of 1927, the Congress rechartered the Federal Reserve Banks into perpetuity, and so there is currently no "expiration date" or repeal date for the Federal Reserve.

Does the Federal Reserve maintain accounts for individuals? Can individuals use such accounts to pay bills and get money?

No. The Federal Reserve Banks provide financial services to banks and governmental entities only. Individuals cannot, by law, have accounts at the Federal Reserve.

Are the Reserve Banks' boards of directors involved in banking supervision matters?

No. To avoid any actual or perceived conflicts of interest resulting from the financial interests and outside affiliations of Reserve Bank directors, Reserve Banks may not provide confidential supervisory information to any director. Moreover, Reserve Bank directors may not participate in bank supervisory matters and may not be consulted regarding bank examination ratings, potential enforcement actions, application/approval matters, or similar supervisory matters. Similarly, because of the potential for an actual or perceived conflict of interest, Class A (banker) directors may not be involved in the selection, appointment, or compensation of Reserve Bank officers whose primary duties involve supervisory matters. Class B directors who are affiliated with a thrift holding company that is supervised by the Federal Reserve may also not be involved in the selection, appointment, or compensation of Reserve Bank officers whose primary duties involve supervisory matters.

Why is it important to separate Federal Reserve monetary policy decisions from political influence?

Policymakers, academics, and other informed observers around the world have reached broad consensus that the goals of monetary policy should be established by the political authorities, but the conduct of monetary policy in pursuit of those goals should be free from political influence. Careful empirical studies support the view that central banks able to conduct day-to-day monetary policy operations free of political pressure tend to deliver better inflation outcomes, without compromising economic growth (see "Further Reading" below). And, while it is important to keep politics out of monetary policy decisions, it is equally important, in a democracy, for those decisions--and, indeed, all of the Federal Reserve's decisions and actions--to continue to be undertaken in a strong framework of accountability and transparency. The public and our elected representatives have a right to know how the Federal Reserve carries out its responsibilities. To achieve its congressionally mandated goals of price stability, maximum employment, and moderate long-term interest rates, Federal Reserve policymakers must attempt to guide the economy, over time, toward a growth rate consistent with the expansion in its underlying productive capacity. Because monetary policy works with time lags that can be substantial, achieving this objective requires that monetary policymakers take a longer-term perspective when making their decisions. Policymakers in an independent central bank, with a mandate to achieve the best possible economic outcomes in the longer term, are best able to take such a perspective. In contrast, policymakers in a central bank subject to short-term political influence may face pressures to overstimulate the economy to achieve short-term output and employment gains that exceed the economy's underlying potential. Such gains may be popular at first, but they are not sustainable and soon evaporate, leaving behind only inflation that worsens the economy's longer-term prospects. Thus, political interference in monetary policy can generate undesirable boom-bust cycles that ultimately lead to both a less stable economy and higher inflation. Political influence on monetary policy decisions can also impair the inflation-fighting credibility of the central bank, resulting in higher average inflation and, consequently, a less-productive economy. Central banks regularly commit to maintaining low inflation in the longer term; if such a promise is viewed as credible by the public, then it will tend to be self-fulfilling, as inflation expectations will be low and so increases in wages would be the result of factors other than a need for households to adjust to a higher cost of living. Therefore, if inflation expectations are low, workers may temper their demands for higher wages, and then, if labor costs remain stable, firms may temper their demands for higher prices. On the other hand, a central bank subject to short-term political influences would likely not be credible when it promised low inflation, as the public would recognize the risk that monetary policymakers could be pressured to pursue short-run expansionary policies that would be inconsistent with long-run price stability. When a central bank's deliberations and actions are not deemed credible, businesses and consumers will expect higher inflation and, accordingly, workers will demand higher wages, and businesses will demand more-rapid increases in prices. Thus, a lack of central bank independence can lead to higher inflation and inflation expectations in the longer run, with no offsetting benefits in terms of greater output or employment. This outcome occurs because the maximum sustainable levels of output and employment are largely determined by non-monetary factors that affect the structure and dynamics of the economy. Additionally, in some situations, a government that controls the central bank may face a strong temptation to abuse the central bank's money-creation powers to help finance government budget deficits. Abuse by the government of the power to issue money as a means of financing its spending inevitably leads to high inflation and interest rates and a volatile economy.

Is it legal for a business in the United States to refuse cash as a form of payment?

Section 31 U.S.C. 5103, entitled "Legal tender," states: "United States coins and currency [including Federal reserve notes and circulating notes of Federal reserve banks and national banks] are legal tender for all debts, public charges, taxes, and dues." This statute means that all United States money as identified above is a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.

How will the Federal Reserve ensure that the size of its balance sheet won't lead to excessive inflation?

Since the financial crisis, the Federal Open Market Committee (FOMC) has undertaken a highly accommodative monetary policy. In addition to maintaining an exceptionally low level for the federal funds rate, the Committee expanded the Federal Reserve's holdings of longer-term securities as a means to put downward pressure on longer-term interest rates and make broader financial conditions more accommodative. These actions have helped to support a stronger economic recovery and ensure that inflation, over time, is at levels consistent with the Committee's mandate to maintain maximum employment and stable prices. The FOMC monitors the stance of monetary policy, the economic outlook, and financial developments closely. The Committee has the tools it needs to tighten monetary policy at the appropriate time. The FOMC issued its principles and plans for normalization in September 2014. In that document, the Committee indicated that during normalization it intends to continue to set a range for the federal funds rate and to use its policy tools to keep the funds rate in the target range. When economic conditions and the economic outlook warrant a less accommodative monetary policy, the Committee will raise its target range for the federal funds rate. During normalization, the Federal Reserve intends to move the federal funds rate into the target range set by the FOMC primarily by adjusting the interest rate it pays on excess reserve balances. In addition, the Federal Reserve intends to use an overnight reverse repurchase agreement facility and other supplementary tools as needed to help control the federal funds rate. The Committee will use an overnight reverse repurchase agreement facility only to the extent necessary and will phase it out when it is no longer needed to help control the federal funds rate. The Committee is prepared to adjust the details of its approach to policy normalization in light of economic and financial developments.

What specific steps does the Board take to issue a regulation?

Step 1: Proposed Regulation Step 2: Comment Period Step 3: Final Regulation

What is the basic legal framework that determines the conduct of monetary policy?

The Congress established a basic legal framework for the conduct of monetary policy that involves three key pillars: statutory long-run economic objectives for the conduct of monetary policy--maximum employment and stable prices a structure for the Federal Reserve System that provides for a significant degree of operational independence in the conduct of monetary policy mechanisms to ensure appropriate transparency and accountability of the Federal Reserve in the conduct of monetary policy

Is the Fed's emergency lending audited by the Congress? Is information about the Fed's emergency lending provided to the public?

The Congress established several mechanisms to enhance transparency and accountability for the Federal Reserve's emergency lending authorized under section 13(3) of the Federal Reserve Act: The Government Accountability Office (GAO) conducted an "operational audit" of the emergency lending facilities that the Federal Reserve established during the financial crisis. The GAO issued a report on July 21, 2011. The audit found no conflicts of interest or material weaknesses in internal controls in the emergency facilities. The GAO also conducted an audit of Reserve Bank governance and provided a report (including recommendations) to the Congress on October 19, 2011. On December 1, 2010, the Board disclosed the identities of borrowers and participants in the Term Auction Facility, the government-sponsored enterprise mortgage-backed securities purchase program, and foreign currency swap lines. In the case of broad-based facilities, details provided by the Board included the name of the borrower; the amount borrowed; the date the credit was extended; the interest rate charged; and information about collateral and other relevant credit terms. Similar information was provided for the draws of foreign central banks on their dollar liquidity swap lines with the Federal Reserve. For agency mortgage-backed securities transactions, details included the name of the counterparty; the security purchased or sold; and the date, amount, and price of the transaction. The Congress also established important new reporting requirements for any future use of the Federal Reserve's emergency lending authority under section 13(3) of the Federal Reserve Act. Within seven days of establishment of any 13(3) program, the Board must report detailed transaction-level information to the Congress on any lending activity conducted under those programs. The GAO may conduct "operational audits" of any future 13(3) facilities for the purpose of assessing the operational integrity of a credit facility and assessing the effectiveness of collateral policies in mitigating risks to the taxpayer. Within one year after the termination of a credit facility, the Board must provide detailed transaction-level information to the public, including the names of the borrowers, the amounts borrowed, the rate charged, and information on the types and amounts of collateral pledged.

What are the Federal Reserve's objectives in conducting monetary policy?

The Congress established the statutory objectives for monetary policy--maximum employment, stable prices, and moderate long-term interest rates--in the Federal Reserve Act. The Federal Open Market Committee (FOMC) is firmly committed to fulfilling this statutory mandate. In pursuing these objectives, the FOMC seeks to explain its monetary policy decisions to the public as clearly as possible. Clarity in policy communications facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society. Following its meeting in January 2012, the FOMC issued a statement regarding its longer-run goals and monetary policy strategy. The FOMC noted in its statement that the Committee judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the FOMC's ability to promote maximum employment. The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the job market. These factors may change over time and may not be directly measurable. As a result, the FOMC does not specify a fixed goal for maximum employment; rather, the FOMC's policy decisions must be informed by its members' assessments of the maximum level of employment, though such assessments are necessarily uncertain and subject to revision. In the FOMC's September 2018 Summary of Economic Projections, Committee participants' estimates of the longer-run normal rate of unemployment ranged from 4.0 to 4.6 percent and had a median value of 4.5 percent. In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate.

How does the foreign exchange value of the dollar relate to Federal Reserve policy?

The Department of the Treasury is the lead agency setting U.S. international economic policy, including policies regarding the dollar. The value of the dollar is determined in foreign exchange markets, and neither the U.S. Treasury nor the Federal Reserve targets a level for the exchange rate. Nonetheless, movements in the exchange value of the dollar represent an important consideration for monetary policy--such movements exert influence on U.S. economic activity and prices and constitute one of the ways the effects of monetary policy reach the broader economy. Accordingly, while U.S. monetary policy does not aim for a particular level of the dollar, policymakers take into account the effects of the dollar on prices and economic activity in the United States.

Who is on the Federal Open Market Committee?

The Federal Open Market Committee (FOMC) comprises up to 12 voting members: all members of the Board of Governors (maximum of seven) the president of the Federal Reserve Bank of New York four of the 11 remaining Reserve Bank presidents, who serve one-year terms on a rotating basis

What is the Federal Open Market Committee?

The Federal Open Market Committee (FOMC) is the body within the Federal Reserve System that sets national monetary policy. The FOMC's decisions influence the cost and availability of credit to borrowers and the returns earned by savers. The FOMC sets a target range for the federal funds rate (the rate at which depository institutions lend to each other). Changes in that target are reflected in market interest rates as well as interest rates on bank loans and deposits. The FOMC also makes decisions about the size and composition of the Federal Reserve's asset holdings, and it communicates with the public about the likely future course of monetary policy. The FOMC has eight regularly scheduled meetings a year in Washington, D.C. and has additional meetings as needed.

Why does the Federal Reserve aim for 2 percent inflation over time?

The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve's mandate for price stability and maximum employment. Over time, a higher inflation rate would reduce the public's ability to make accurate longer-term economic and financial decisions. On the other hand, a lower inflation rate would be associated with an elevated probability of falling into deflation, which means prices and perhaps wages, on average, are falling--a phenomenon associated with very weak economic conditions. Having at least a small level of inflation makes it less likely that the economy will experience harmful deflation if economic conditions weaken. The FOMC implements monetary policy to help maintain an inflation rate of 2 percent over the medium term.

Which denominations of currency does the Federal Reserve issue?

The Federal Reserve Board currently issues $1, $2, $5, $10, $20, $50, and $100 notes. The largest denomination Federal Reserve note ever issued for public circulation was the $10,000 note. On July 14, 1969, the Federal Reserve and the Department of the Treasury announced that banknotes in denominations of $500, $1,000, $5,000, and $10,000 would be discontinued due to lack of use. Although they were issued until 1969, they were last printed in 1945.

I received a suspicious-looking e-mail that claims to be from the Federal Reserve. Is it a scam?

The Federal Reserve Board regularly monitors fraudulent solicitations and communications that purport to be made with the approval or involvement of the Federal Reserve or Federal Reserve officials. These scams often take the form of e-mail messages that seek to obtain personal information that is later used to commit fraud or theft. The Federal Reserve does not communicate directly with consumers. Individuals should be suspect of any e-mail message that claims to be from the Federal Reserve or references a Federal Reserve product or service. Recipients should not click on any links contained in these types of e-mails and should delete them immediately.

Is the Federal Reserve aware of the challenges that I and others in my community face? Does the Federal Reserve take these issues into account when developing national policy?

The Federal Reserve System is composed of 12 regional Reserve Banks throughout the country and the Board of Governors in Washington, D.C. This structure enables the Federal Reserve to gather information from a wide and diverse range of communities. Each Reserve Bank has a division, department, or group that focuses on regional Community Development issues, with a particular emphasis on serving low- and moderate-income communities and populations. The people on these teams work within their communities by promoting cooperation among community organizations, financial institutions, government officials, and academics; educating the public about financial issues; and advising policymakers, community leaders, and others about community development best practices.

Who owns the Federal Reserve?

The Federal Reserve System is not "owned" by anyone. Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was established to serve the public interest. The Federal Reserve derives its authority from the Congress, which created the System in 1913 with the enactment of the Federal Reserve Act. This central banking "system" has three important features: (1) a central governing board--the Federal Reserve Board of Governors; (2) a decentralized operating structure of 12 Federal Reserve Banks; and (3) a blend of public and private characteristics. The Board of Governors in Washington, D.C., is an agency of the federal government. The Board--appointed by the President and confirmed by the Senate--provides general guidance for the Federal Reserve System and oversees the 12 Reserve Banks. The Board reports to and is directly accountable to the Congress but, unlike many other public agencies, it is not funded by congressional appropriations. In addition, though the Congress sets the goals for monetary policy, decisions of the Board--and the Fed's monetary policy-setting body, the Federal Open Market Committe--about how to reach those goals do not require approval by the President or anyone else in the executive or legislative branches of government. Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.

How is the Federal Reserve System structured?

The Federal Reserve System was designed to give it a broad perspective on the economy and on economic activity in all parts of the nation. It is a federal system, composed of a central, independent governmental agency--the Board of Governors--in Washington, D.C., and 12 regional Federal Reserve Banks, located in major cities throughout the nation. These components share responsibility for supervising and regulating certain financial institutions and activities; providing banking services to depository institutions and to the federal government; and ensuring that consumers receive adequate information and fair treatment in their business with the banking system.

What is the purpose of the Federal Reserve System?

The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law. Today, the Federal Reserve's responsibilities fall into four general areas. Conducting the nation's monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices. Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers. Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets. Providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions, and playing a major role in operating and overseeing the nation's payments systems.

How does the Federal Reserve cooperate with foreign policymakers to promote economic growth and financial stability?

The Federal Reserve conducts its monetary policy independently and in accord with its dual mandate from the Congress to promote price stability and maximum sustainable employment in the United States. To help meet these objectives, officials of the Federal Reserve regularly consult with representatives of other central banks. These consultations allow policymakers to share their thinking, compare analyses, and stay informed of developments around the world. Such contacts also help central banks move quickly when shared problems call for swift joint responses. During the recent financial crisis, for example, central banks provided crucial support to the global economy and financial system through a coordinated cut in interest rates and the creation of dollar liquidity swap lines to keep money markets functioning.

Does the Federal Reserve own or hold gold?

The Federal Reserve does not own gold. The Gold Reserve Act of 1934 required the Federal Reserve System to transfer ownership of all of its gold to the Department of the Treasury. In exchange, the Secretary of the Treasury issued gold certificates to the Federal Reserve for the amount of gold transferred at the then-applicable statutory price for gold held by the Treasury. Gold certificates are denominated in U.S. dollars. Their value is based on the statutory price for gold at the time the certificates are issued. Gold certificates do not give the Federal Reserve any right to redeem the certificates for gold. The statutory price of gold is set by law. It does not fluctuate with the market price of gold and has been constant at $42 2/9, or $42.2222, per fine troy ounce since 1973. The book value of the gold held by the Treasury is determined using the statutory price. Although the Federal Reserve does not own any gold, the Federal Reserve Bank of New York acts as the custodian of gold owned by account holders such as the U.S. government, foreign governments, other central banks, and official international organizations. No individuals or private sector entities are permitted to store gold in the vault of the Federal Reserve Bank of New York or at any Federal Reserve Bank. A small portion of the gold held by the U.S. Treasury (roughly $600 million in book value)--about five percent--is held in custody for the Treasury by the Federal Reserve Banks, as fiscal agents of the United States. The vast majority of this gold is located in the vault at the Federal Reserve Bank of New York, and a very small portion is on display in several Federal Reserve Banks. The remaining 95 percent of U.S. Treasury gold ($10.4 billion in book value) is held in custody for the Treasury by the U.S. Mint.

Is the Federal Reserve accountable to anyone?

The Federal Reserve is accountable to the public and the U.S. Congress. The Fed believes transparency is a fundamental principle of central banking that supports accountability. In the area of monetary policy, twice a year, the Federal Reserve submits an extensive report on recent economic developments and its plans for monetary policy. In addition, the Chair and other Federal Reserve officials often testify before the Congress. To further clear communication and foster transparency and accountability in monetary policy, the Federal Open Market Committee (FOMC)--the body of the Federal Reserve System that sets national monetary policy--publishes a statement immediately following each of its eight annual FOMC meetings that describes the Committee's views regarding the economic outlook and provides a rationale for its policy decision. Full minutes for each meeting are published three weeks after each FOMC meeting. Full verbatim transcripts of the FOMC meetings are made available with a five-year lag. Further, the Federal Reserve Chair holds press conferences after selected FOMC meetings to discuss the monetary policy outlook. International experience shows that monetary policy tends to be more effective in supporting stable prices and strong employment when it is shielded from short-term political influence, which is one reason the Congress has given the Federal Reserve considerable operational independence to set policy. At the same time, in a democratic society it is appropriate that operational independence is paired with central bank accountability to the public and its elected representatives. Clear communications about the goals and strategy of monetary policy are also essential for enhancing the effectiveness of systematic monetary policy because when the public and investors understand the goals of monetary policy, inflation expectations are more likely to remain well anchored. The Federal Reserve is also transparent and accountable in its supervision of banks, operations of the payment system, and in its other functions as well. The Board of Governors prepares an annual report summarizing activities of the Board and all Reserve Banks; the annual report is delivered to the Congress. To ensure financial accountability, the financial statements of the Federal Reserve Banks and the Board of Governors are audited annually by an independent, outside auditor. In addition, the Government Accountability Office, as well as the Board's Office of Inspector General, frequently audit many Federal Reserve activities. Weekly, the Board of Governors publishes the Federal Reserve's balance sheet. During the recent financial crisis, the Federal Reserve provided information about its lending programs on its public website and in a special monthly report to the Congress. The Board also regularly reports the results of supervisory stress tests of large banks.

Why does the Federal Reserve lend money to banks?

The Federal Reserve lends to banks and other depository institutions--so-called "discount window lending"--to address temporary problems they may have in obtaining funding. Those problems can range from "garden variety" issues, such as funding pressures associated with unexpected changes in a bank's loans and deposits, to extraordinary events, such as those that occurred after the September 11, 2001, terrorist attacks or during the financial crisis in 2008 and 2009. In all of these cases, the Federal Reserve provides loans when normal market funding cannot meet banks' funding needs; while the discount window is not intended for ongoing use in normal market conditions, it is available to cover unexpected developments. To encourage banks to first seek funding from market sources, the Federal Reserve lends at a rate that is higher, and thus more expensive, than the short-term rates that banks could obtain in the market under usual circumstances. To minimize the risk that the Federal Reserve will incur losses from lending, borrowers must pledge collateral, such as loans and securities. Since 1913 when the Federal Reserve was established, it has never lost a cent on its discount window loans to banks.

Does the Federal Reserve tell the public what it holds on its balance sheet?

The Federal Reserve publishes many reports that provide information about the assets and liabilities on its balance sheet as part of an effort to enhance transparency and ensure appropriate accountability to the Congress and the public. The H.4.1 statistical release, a consolidated balance sheet for all 12 Reserve Banks The Federal Reserve Bank of New York publishes a list of all the securities held in the System Open Market Account A quarterly report with detailed information about the balance sheet, the consolidated financial position, and the results of operations of the Reserve Banks

I have a problem with my bank. How do I file a complaint against it?

The Federal Reserve urges you to file a complaint if you think a bank has been unfair or misleading, discriminated against you in lending, or violated a federal consumer protection law or regulation. You can file a complaint online through the Federal Reserve's Consumer Complaint Form. You can also call or email Federal Reserve Consumer Help, the System's central repository for consumer complaints and inquiries, and they will walk you through the process of filing a complaint and answer any questions you might have. Although the Federal Reserve looks into every complaint that involves banks it regulates, it does not have the authority to resolve every problem. There are several federal agencies who handle complaints about banks and other financial institutions, so the Federal Reserve may connect you with or forward your complaint to another federal regulator.

What economic goals does the Federal Reserve seek to achieve through its monetary policy?

The Federal Reserve works to promote a strong U.S. economy. The Congress has directed the Fed to conduct the nation's monetary policy to support three specific goals: maximum sustainable employment, stable prices, and moderate long-term interest rates. These goals are sometimes referred to as the Fed's "mandate." Maximum sustainable employment is the highest level of employment that the economy can sustain while maintaining a stable inflation rate. Prices are considered stable when consumers and businesses don't have to worry about rising or falling prices when making plans, or when borrowing or lending for long periods. When prices are stable, long-term interest rates remain at moderate levels, so the goals of price stability and moderate long-term interest rates go together. The Fed seeks to achieve its monetary policy mandate by influencing interest rates and general financial conditions. For example, by keeping policy interest rates low, the Fed makes homes more affordable for consumers and makes it cheaper for businesses to invest, expand, and hire. And by raising policy interest rates when inflation pressures are building, the Fed helps to cool the economy and preserve price stability.

What does it mean that the Federal Reserve is "independent within the government"?

The Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. The Congress also structured the Federal Reserve to ensure that its monetary policy decisions focus on achieving these long-run goals and do not become subject to political pressures that could lead to undesirable outcomes. So, members of the Board of Governors are appointed for staggered 14-year terms and the Board chair is appointed for a four-year term. Elected officials and members of the Administration are not allowed to serve on the Board. The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the Federal Reserve System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

Who are the members of the Federal Reserve Board, and how are they selected?

The members of the Board of Governors are nominated by the President of the United States and confirmed by the U.S. Senate. By law, the appointments must yield a "fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country," and no two Governors may come from the same Federal Reserve District. The full term of a Governor is 14 years; appointments are staggered so that one term expires on January 31 of each even-numbered year. A Governor who has served a full term may not be reappointed, but a Governor who was appointed to complete the balance of an unexpired term may be reappointed to a full 14-year term. Once appointed, Governors may not be removed from office for their policy views. The lengthy terms and staggered appointments are intended to contribute to the insulation of the Board--and the Federal Reserve System as a whole--from day-to-day political pressures to which it might otherwise be subject. In addition to serving as members of the Board, the Chair and Vice Chairman of the Board serve terms of four years, and they may be reappointed to those roles and serve until their terms as Governors expire. The Chair serves as public spokesperson and representative of the Board and manager of the Board's staff. The Chair also presides at Board meetings. Affirming the apolitical nature of the Board, recent Presidents of both major political parties have selected the same person as Board Chair. The Congress sets the salaries of the Board members. For 2017, the Chair's annual salary is $199,700. The annual salary of the other Board members (including the Vice Chairman) is $179,700.

What are the Minutes of the Federal Open Market Committee?

The minutes of Federal Open Market Committee (FOMC) meetings, which are released three weeks after each meeting, provide a timely summary of the discussion during the meeting and the decisions taken at the meeting. The minutes describe the views expressed by policymakers and explain the reasons for the Committee's decisions. The minutes can help the public interpret economic and financial developments and understand the Committee's decisions. As an official record of the meeting, the minutes identify all attendees, and provide a complete record of policy actions taken, including the votes by individual members on each policy action.

What are the Transcripts of the Federal Open Market Committee?

The most detailed record of FOMC meeting proceedings is the transcript. Transcripts, beginning with the first FOMC meetings in 1936, are available on the Federal Reserve Board's website. The FOMC currently releases the transcripts of its meetings after an interval of about five years. This interval helps ensure that participants can have a candid and free exchange of views about economic conditions and alternative policy approaches. The few other G-20 central banks that release transcripts do so with longer intervals: the Bank of Japan after 10 years, the Bank of England after eight years (with the first transcript scheduled to be released in 2023), and the European Central Bank after 20 years (with the first transcript scheduled to be released in 2028).

Why is the Federal Reserve paying banks interest?

The payment of interest on banks' reserve balances is a common monetary policy tool at the disposal of major central banks. The Congress authorized the Federal Reserve to pay interest on balances that banks hold at the Fed, effective late in 2008. Since then, the Federal Reserve has paid interest on balances that banks hold to meet reserve requirements and on amounts in excess of required reserves. The Board of Governors sets the interest rate the Federal Reserve pays on reserve balances to help implement the FOMC's monetary policy decisions. During the monetary policy normalization process, the Federal Reserve intends to raise the interest rate it pays on reserve balances in line with increases in the main monetary policy rate--the target that the FOMC sets for the federal funds rate. Doing so will help control the federal funds rate and keep it in the target range set by the FOMC. When the Federal Reserve raises the IOER rate, banks will take this new, higher rate into account when making decisions about lending funds and would be unlikely to loan funds for an interest rate that is below the IOER rate. More broadly, as the Federal Reserve increases rates, banks will also have to pay higher rates on their sources of funding--that includes paying more to depositors. And that process will help to boost incomes for savers, many of whom have experienced low returns for quite a few years.

What is the prime rate, and does the Federal Reserve set the prime rate?

The prime rate is an interest rate determined by individual banks. It is often used as a reference rate (also called the base rate) for many types of loans, including loans to small businesses and credit card loans. On its H.15 statistical release, "Selected Interest Rates," the Board reports the prime rate posted by the majority of the largest twenty-five banks. Although the Federal Reserve has no direct role in setting the prime rate, many banks choose to set their prime rates based partly on the target level of the federal funds rate--the rate that banks charge each other for short-term loans--established by the Federal Open Market Committee.

How does the Board revise a regulation?

The process to change an existing regulation generally is the same as the process to issue a new regulation. Importantly, when the Board issues a proposed regulation that would revise an existing regulation, the existing regulation remains fully effective until the Board issues a final regulation revising it.

How can I start a bank?

The proposed bank must first receive approval for a federal or state charter. The Office of the Comptroller of the Currency (OCC) has exclusive authority to issue a federal or "national bank" charter, while any state (and the District of Columbia, Guam, Puerto Rico, and the Virgin Islands) may issue a state charter. Before granting a charter, the OCC or state must be able to determine that the applicant bank has a reasonable chance for success and will operate in a safe and sound manner. Next, the proposed bank must obtain approval for deposit insurance from the Federal Deposit Insurance Corporation (FDIC). Additional approvals are required from the Federal Reserve if, at formation, a company would control the new bank and/or a state-chartered bank would become a member of the Federal Reserve.

What is aggregate demand?

The sum of demands for goods and services--by individuals, businesses, and governments

What is the money supply? Is it important?

There are several standard measures of the money supply, including the monetary base, M1, and M2. The monetary base is defined as the sum of currency in circulation and reserve balances (deposits held by banks and other depository institutions in their accounts at the Federal Reserve). M1 is defined as the sum of currency held by the public and transaction deposits at depository institutions (which are financial institutions that obtain their funds mainly through deposits from the public, such as commercial banks, savings and loan associations, savings banks, and credit unions). M2 is defined as M1 plus savings deposits, small-denomination time deposits (those issued in amounts of less than $100,000), and retail money market mutual fund shares

How much U.S. currency is in circulation?

There was approximately $1.69 trillion in circulation as of September 26, 2018, of which $1.64 trillion was in Federal Reserve notes.

How is a Federal Reserve Bank president selected?

To conduct the search, the Reserve Bank's board of directors forms a search committee composed of Class B and C directors. That committee hires a search firm to help identify a broad, diverse, highly qualified candidate pool. The committee considers a large nationwide pool of candidates, both within and outside the Federal Reserve System, who meet the position's qualifications. The Banks seek candidates who can guide the focus of the Bank's economic research and gather economic intelligence through interactions with the Bank's board of directors and other business and community contacts, provide keen insights to Federal Open Market Committee policy discussions, communicate clearly about monetary policy, be a strong chief executive officer of the Bank, ensure the Bank maintains an effective system of bank supervision by faithfully carrying out its delegated authority from the Board of Governors, and make strong personal contributions to matters requiring collective System action or direction. The chair of the Board of Governors' Committee on Federal Reserve Bank Affairs meets regularly with the search committee chair throughout the search process regarding the candidate pool, with a particular focus on ensuring it is broad and diverse. The search committee interviews a range of potential candidates and forwards to the Board of Governors a list of finalist candidates, all of whom are interviewed by the governors. The Bank's Class B and C directors then formally appoint a candidate, subject to the approval of the Board of Governors.

What is the process for reappointing Reserve Bank presidents?

Under the Federal Reserve Act all Reserve Bank presidents serve five-year terms that expire at the end of February in years ending with the numerals 1 or 6. Presidents who take office in intervening years are initially appointed for the remainder of their current term. Before the expiration of a president's current term, the Class B and C directors of each Reserve Bank (directors who are not affiliated with a supervised entity) vote on whether to reappoint the president to a new term. In considering whether to reappoint, the eligible Reserve Bank directors assess their president's performance. The assessment includes consideration of, for example, the president's ability to effectively lead the Reserve Bank, the president's performance in achieving the Reserve Bank's and Federal Reserve System's strategic objectives, and the president's ability to effectively represent the Federal Reserve to the public. The Reserve Bank directors' assessment is also informed by annual discussions between the chair and deputy chair of each Reserve Bank board and the Board of Governors' Committee on Federal Reserve Bank Affairs. Reappointments are subject to approval by the Board of Governors, which reviews the Reserve Bank directors' assessment of their president's performance and any additional perspectives from members of the Board of Governors.

Why does the United States periodically redesign its currency?

We redesign U.S. currency to stay ahead of counterfeiting threats and keep counterfeiting levels low. The Federal Reserve, together with our partners at the Treasury Department, its Bureau of Engraving and Printing, and the United States Secret Service, continuously monitor the counterfeiting threats for each denomination of U.S. currency and make redesign decisions based on these threats. An inter-agency committee makes recommendations on design changes to the Secretary of the Treasury, who has final authority for U.S. currency designs.

How long is the lifespan of U.S. paper money?

When currency is deposited with a Federal Reserve Bank, the quality of each note is evaluated by sophisticated processing equipment. Notes that meet our strict quality criteria--that is, that are still in good condition--continue to circulate, while those that do not are taken out of circulation and destroyed. This process determines the lifespan of a Federal Reserve note. The lifespan of Federal Reserve notes varies by denomination and depends on a number of factors, including how the denomination is used by the public. For example, larger denominations such as $100 notes are often used as a store of value, which means they pass between users less frequently than lower-denominations such as $5 notes, which are more often used for transactions.

How can I contact members of the Board of Governors or request to have a Board member speak at an event?

Write directly to the Board member, addressing him or her as "The Honorable." Because the Board receives many requests, please allow at least ten business days for a response. Requests may be faxed to 202-452-3819 or mailed to the following address: Federal Reserve Board 20th Street and Constitution Avenue, N.W. Washington, D.C. 20551

Does the Federal Reserve ever get audited?

Yes, the Board of Governors, the 12 Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review: The Government Accountability Office (GAO) conducts numerous reviews of Federal Reserve activities every year. The Board's financial statements, and its compliance with laws and regulations affecting those statements, are audited annually by an outside auditor retained by the independent Office of Inspector General (OIG). The results of this independent audit are released to the Congress and the public. The Board's OIG conducts independent audits, evaluations, and criminal investigations relating to the programs and operations of the Board, as well as those Board functions delegated to the Reserve Banks. Completed OIG reports are publicly available as well as a dynamic Work Plan that lists all of the OIG's ongoing and planned audit and evaluation work. In addition, completed and active GAO reviews and completed OIG audits, reviews, and assessments are listed in the Board's Annual Report. The financial statements of the Reserve Banks are also audited annually by an independent outside auditor. Each week, the Federal Reserve publishes its balance sheet and charts of recent balance sheet trends; it also provides an interactive guide to the Fed's balance sheet. The balance sheet is included in the Federal Reserve's H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks." In addition, the Reserve Banks are subject to annual examination by the Board. The Board's financial statements and the combined financial statements for the Reserve Banks are published in the Board's Annual Report.

How can I comment on a regulatory proposal?

You may submit comments on proposals by: Completing the applicable form on either the Federal Reserve's "Proposals for Comment" page or the Federal eRulemaking Portal, or by Mailing or e-mailing comments to the address provided in the text of each proposal.

What does the Federal Reserve mean when it talks about the "normalization of monetary policy"?

he global financial crisis that began in 2007 had profound effects on the U.S. economy and other economies around the world. To support a return to the Federal Reserve's statutory goals of maximum employment and price stability, the Federal Open Market Committee (FOMC) reduced short-term interest rates to nearly zero and held them at that exceptionally low level for seven years. The FOMC also undertook large-scale open-market purchases of longer-term U.S. Treasury securities and mortgage-backed securities (MBS) to put downward pressure on longer-term interest rates. The term "normalization of monetary policy" refers to plans for returning both short-term interest rates and the Federal Reserve's securities holdings to more normal levels. In September 2014, the FOMC published a statement of Policy Normalization Principles and Plans describing the overall strategy it intends to follow in normalizing the stance of monetary policy following the period of extraordinarily accommodative policies taken in the aftermath of the 2008-09 recession. These plans were further elaborated in the minutes of the March 2015 FOMC meeting. At its December 2015 meeting, the FOMC decided to begin the normalization process by modestly raising its target range for the federal funds rate.