The Important Assignments Of The Federal Reserve (Central Bank)
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The Federal Reserve (central bank) has three central utensils at its clearance to impact monetary policy. One is the open market operations being regularly engaged as a means of monetary policy. Another is setting the discount rate, meaning the interest rate banks fee take on temporary loans from a Federal Reserve Bank.
The Federal Open Market Committee, the fiscal
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For example, if the Federal Reserve decreases the discount rate, then the bank can afford to borrow the money and in turn, the consumer would be able to benefit
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To conduct the nation’s monetary policy is to “promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;” (Board). The Federal Reserve promotes the stability of the financial system. Promoting the stability of the financial system is to seek to “minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;” (Board). The Federal Reserve promotes the safety and soundness of individual financial institutions, “and monitors their impact on the financial system as a whole;” (Board). The Federal Reserve “fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments;” and “promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of
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The goals for the monetary policy is to maximize employment, stable prices and moderate long term interest in the federal reserve act. The federal open market committee (FOMC) gave these goals to them. The FOMC seeks to explain its monetary policies to the public clearly. It is important to clearly explain the monetary policy decisions for Many reasons.
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The Federal Reserve Act of 1913 was an attempt to stabilize the to the fiscal markets, after the Panic of 1907 demonstrated the issues inherent with a system without control. This established twelve regional Federal Reserve Banks with a lot of autonomy and gave them the authority to discount eligible securities from member banks to provide some elasticity to the financial system. During the early years, the Federal Reserve System (FRS) had a limited part in the United States’ economic life. It was not till the Great Depression that things changed for the FRS. The 1935 Banking Act created in Washington D.C., a Board of Governors with more authority over the operations of open market and the discounting of rates for Federal Reserve Banks.
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This is primarily a tool at the disposal of the central bank of a country which uses different tools to manage the macro economic variables of a country to keep the economy stable or to stabilize it in situations of fluctuations. Monetary policy can be expansionary or contractionary depending on whether the money supply is being increased or decreased in the system so as to affect economic growth, inflation, exchange rates with other currencies and
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