The Federal Reserve was created by the Congress in 1913 to function as the nation's central bank. The Federal Reserve had four components, which are in place even today. There are as follows:
• Board of Governors comprising of 7 members. They are responsible for setting the monetary policy of the nation.
• A Federal Open Market Committee (FOMC) made up of 12 members who are responsible for setting the interest rate to be charged by the Federal Reserve Bank. All board members are also part of the FOMC.
• 12 regional bank members located throughout the United States.
• Economists who provide reports to the Congress.
The main function of the Federal Reserve System, also known as Fed, is to control inflation in the country without allowing recession to set in. In addition, the Feds also perform the following functions:
• They supervise the banking system in the country so that consumers are protected.
• They maintain stability of the financial markets and try to avert potential financial crises.
• They are the central bank for all other banks in the country, for the US government and for foreign banks.
As the nation's central bank, the Fed loans out money to a network of private banks and this helps it to control inflation by regulating the economy. They can do this by either raising the interest rates or lowering it depending on the financial climate. If the interest rates are low, the economy grows fast and when this happens, inflation is triggered in the country. Inflation can be controlled by increasing the interest rates.
The Fed has the power to affect our lives as whatever step it takes affects our stocks, bonds and mortgage rates. Indirectly, based on the interest rates, our home value is determined and if inflation increases or there are signs of recession, you may also end up getting laid off from your job. That is the power that the Federal Reserve has over all of us.
About Author: Pauline Go is an online leading expert in finance industry. She also offers top quality finance tips like :
Payday Loan Tips, Bond Funds With Highest Returns, Tax Write off List
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