FED – Federal Reserve System

The Federal Reserve System

Meaning of the term of FED

The FED or in simpler terms we can say that it refers to Federal funds rates or Federal Reserve rates. These are nothing but the rate of interest which the bank usually sets according their own will and conditions. The norm can be changed overnight. These are nothing but the rate of interest which is being charged by the banks in lending loans to its customers. The FED interest rates are been set by the borrowing banks towards the lending bank in order to get the loan for a particular duration of time. The particular federal fund target interest rate is usually calculated and resolute by the board of members of the Federal Open Market. The tenure of the meeting is usually eight times in one year. But in case of emergency meetings can be held at any time. The flea market operations are utilized basically by the Federal Reserve to keep a check on the money flow.

Functions of FED

1. The FED’s main objective is to deal with inflation, as we know inflation is a most terrifying issue in the current world no country is untouched by it; on the other hand it has to control recession also which is generally triggered by inflation. 2. Another function of FED is to supervise the Banking sector of the country to protect the benefit of depositors. Sometimes bank and other originations tend to do this sort of works they derive their customers from the benefits they may get, FED keeps an eye on this as to protect their interests. 3. The other main function of this organization is to keep the financial markets stable and to check for the problems if any. 4. It also plays a role of a Central Bank for all the other’s Banks of the country along with U.S. Government and other foreign banks that mean it’s a central place where all the banks and even the government keep their money.

Its primary objective and job is to manage the inflation, as it’s also the central bank of the nation it provides loan to many other banks all over the country so that the distribution of the money is not decentralized, which is the main cause of inflation. It also has the power to control the economy by keeping it loan rates high or low as per the situation.

Importance of Federal Bank

The Federal Reserve hold the crucial power which withstands in many vital policies and issues regarding the World Bank, it also supervises and regulates the most of the monetary control. It is one the most powerful economic institutions in the world, and provides many types of funding in the US countries. The constitution gives the monetary powers to congress and the congress is relevant for Federal Reserve, as it is known that congress created the Federal Reserve. It also provides the brief overview of what the members of congress should know about Federal Reserve, the groundwork for several subsequent paper surrounding issues are related by the congressional oversight of the federal reserve monetary policy and their goal for price stability. The congressional oversight the Federal Reserve and it is important as:

– Monetary policy dominates the fiscal Policy in some circumstances.
– Monetary Policy determines the inflation.
– Interest rates are influenced by the Federal Reserve.
– Financial system is stabilized by the Federal Reserve.

It summarizes the structure and the importance of the Federal Reserve, it also show the power and the significance of the congressional oversight. It overall describes the basic structure and body of the Federal Reserve Bank.