The following blog post was written by our interns, Mauria Ferrell and Brady Gray. This is Part 1 of their series on the Federal Reserve.
The Federal Reserve is the central bank in the United States. They are in charge of regulating the financial system across the nation. The Federal Reserve was created to facilitate healthy economic growth, while managing to keep inflation and unemployment rates low.
So, what is a central bank? It is the bank at the center of the financial system across the United States. It is your bank’s bank. Our central bank is run by 7 board members that are appointed by the president and confirmed by the senate. The board members purpose is to conduct monetary policy. Also, it is good to know that there are 12 districts that hold 12 Federal Reserve Banks across the country.
Other countries have central banks that operate similar to ours. Some have their differences when it comes to things like managing growth and influencing value of currency in their nations. For example, the European Central Bank gives their market early notice before they make any changes to interest rates. Also, they try to keep the annual growth in consumer prices below 2 percent, unlike the Fed.
Monetary policy refers to the measures taken by the Federal Reserve to achieve economic stability. Their goal is conduct monetary policy in a way that influences the economy to have stable prices, inflation, and employment. They want to make sure the financial system is healthy and that they are doing what is in our best interests. They do this by overseeing and managing the financial industry across the nation.
They have the power to influence the nation’s supply of money. Stay tuned for Part II of the series as we will discuss how all of this happens.