The Federal Reserve: Conclusion
  1. The Federal Reserve: Introduction
  2. The Federal Reserve: What Is The Fed?
  3. The Federal Reserve: Duties
  4. The Federal Reserve: Monetary Policy
  5. The Federal Reserve: The FOMC Rate Meeting
  6. The Federal Reserve: Conclusion

The Federal Reserve: Conclusion

The Fed has more power and influence on financial markets than any legislative entity. Its monetary decisions are intensely observed and often lead the way for other countries to take the same policy changes. We hope that this tutorial has helped to shed some light on how the Fed affects the markets.

Let's recap

  • The Federal Reserve Board was created to in 1913 to provide the nation with a safer, more flexible and more stable monetary and financial system.
  • The Board of Governors of the Federal Reserve heads up the Fed.
  • Twelve Regional Federal Reserve Banks are the operating arms of the Fed.
  • The Federal Open Market Committee (FOMC) is the policy-making branch of the Federal Reserve.
  • The Fed's mandate is "to promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates."
  • The Fed serves as the banker's bank, the government's bank, the regulator of financial institutions and as the nation's money manager.
  • Monetary policy is influenced through open-market operations, the discount rate and reserve requirements.
  • The FOMC sets a target for the federal funds rate and attempts to reach that rate primarily through the use of open market operations.
  • The FOMC typically meets eight times per year to make decisions on monetary policy.
  • If the FOMC wants to increase economic growth, it will reduce the target federal funds rate (and vice versa).
  • If the target rate has been increased, the FOMC sells securities. If the FOMC reduces the target rate, they buy securities.
  • Reducing the target rate means that the fed is putting more money into the economy (and vice versa).
  • Chairman of the Fed, Ben Bernanke took over the position from Alan Greenspan on February 1, 2006. Greenspan had held the position since 1987.

  1. The Federal Reserve: Introduction
  2. The Federal Reserve: What Is The Fed?
  3. The Federal Reserve: Duties
  4. The Federal Reserve: Monetary Policy
  5. The Federal Reserve: The FOMC Rate Meeting
  6. The Federal Reserve: Conclusion
RELATED TERMS
  1. Target Rate

    The interest rate charged by one depository institution on an ...
  2. Federal Open Market Committee - FOMC

    The branch of the Federal Reserve Board that determines the direction ...
  3. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  4. 1913 Federal Reserve Act

    The 1913 U.S. legislation that created the current Federal Reserve ...
  5. Alan Greenspan

    The former chairman of the Board of Governors of the Federal ...
  6. Greenspan Put

    A description of the perceived attempt of then-chairman of the ...
RELATED FAQS
  1. When was the last time the Federal Reserve hiked interest rates?

    Learn about when the U.S. Federal Reserve last increased the federal funds target rate, which was in June 2006 after the ... Read Answer >>
  2. What are the implications of a low Federal Funds Rate?

    Find out what a low federal funds rate means for the economy. Discover the effects of monetary policy and how it can impact ... Read Answer >>
  3. Who controls the Federal Reserve Bank?

    Read about the ownership and control of the Federal Reserve, the most powerful financial institution in the world and the ... Read Answer >>
  4. How do open market operations affect the overall economy?

    Understand how open market operations affect the overall economy. Learn how the Federal Reserve uses open market operation ... Read Answer >>
  5. How does the Federal Reserve's set discount rate affect my personal finances?

    Discover how the Federal Reserve implements its chosen monetary policy through its discount rates, and how these actions ... Read Answer >>
  6. Do lower interest rates increase investment spending?

    Learn how the Federal Reserve Board uses monetary policy and the federal funds rate to influence long-term interest rates ... Read Answer >>

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center