Central Banks - Fed Background RSS Feed

Board of the Governors of the Federal Reserve System

Forex Hound Team — Wed, 30 Jan 2008 11:54:00 EST

The Federal Reserve System, the central bank of the United States, conducts the nation's monetary policy, supervises and regulates banks, and provides a variety of financial services to the U.S. Government and to the nation's banks.

Federal Open Market Committee

Forex Hound Team — Tue, 29 Jan 2008 11:58:00 EST

The group that makes monetary policy for the Federal Reserve System is the Federal Open Market Committee (FOMC). In addition to formulating monetary policy, the FOMC decides whether the Federal Reserve will join the Treasury Department in foreign exchange (FX) market intervention. Intervention has become much less frequent in recent years; U.S. monetary authorities intervened in the FX market eight times in 1995, but only twice in the following seven years.

How the Federal Reserve is Audited

Forex Hound Team — Mon, 28 Jan 2008 12:02:00 EST

Periodic Reviews and Examinations
All Federal Reserve Banks and branches, like commercial depository institutions, are audited and examined regularly.

The Role of Reserve Bank Directors

Forex Hound Team — Sun, 27 Jan 2008 12:04:00 EST

The Federal Reserve Act of 1913 requires each of the 12 Reserve Banks to be "conducted under the supervision and control of a board of directors." Under the Act, each Reserve Bank has nine directors, who represent the interests of their Reserve District for terms of three years. The Reserve Banks' 25 branches also have boards, each with seven or five directors, who represent the interests of their branch territory. In addition, branch directors serve as advisors to their Reserve Bank's head office.

Overview of the Federal Reserve System (Background)

Forex Hound Team — Sat, 26 Jan 2008 12:19:00 EST

The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.

Currency Devaluation and Revaluation

Forex Hound Team — Fri, 25 Jan 2008 12:34:00 EST

At the Bretton Woods Conference in July 1944, international leaders sought to insure a stable post-war international economic environment by creating a fixed exchange rate system. The United States played a leading role in the new arrangement, with the value of other currencies fixed in relation to the dollar and the value of the dollar fixed in terms of gold—$35 an ounce. Following the Bretton Woods agreement, the United States authorities took actions to hold down the growth of foreign central bank dollar reserves to reduce the pressure for conversion of official dollar holdings into gold.

Exchange Stabilization Fund

Forex Hound Team — Thu, 24 Jan 2008 12:38:00 EST

The Exchange Stabilization Fund (ESF) of the United States Treasury was created and originally financed by the Gold Reserve Act of 1934 to contribute to exchange rate stability and counter disorderly conditions in the foreign exchange market. The Act authorized the Secretary of the Treasury, to deal in gold, foreign exchange, securities, and instruments of credit, under the exclusive control of the Secretary of the Treasury subject to the approval of the President.

U.S. Foreign Exchange Intervention

Forex Hound Team — Wed, 23 Jan 2008 12:41:00 EST

The Department of the Treasury and the Federal Reserve, which are the U.S. monetary authorities, occasionally intervene in the foreign exchange (FX) market to counter disorderly market conditions. Since the breakdown of the Bretton Woods system in 1971, the United States has used FX intervention both to slow rapid exchange rate moves and to signal the U.S. monetary authorities' view that the exchange rate did not reflect fundamental economic conditions. U.S. FX intervention became much less frequent in the late 1990s. The United States intervened in the FX market on eight different days in 1995, but only twice from August 1995 through December 2006.

Balance of Payments

Forex Hound Team — Tue, 22 Jan 2008 12:45:00 EST

The balance of payments (BOP) is an accounting of a country's international transactions over a certain time period, typically a calendar quarter or year. It shows the sum of the transactions (purely financial ones, as well as those involving goods or services) between individuals, businesses, and government agencies in that country and those in the rest of the world.

Bank for International Settlements

Forex Hound Team — Mon, 21 Jan 2008 12:55:00 EST

Established in 1930 in Basel, Switzerland, the Bank for International Settlements (BIS) is a bank for central banks. It takes deposits from, and provides a wide range of services to, central banks, and through them, to the international financial system. The BIS also provides a forum for international monetary cooperation, consultation, and information exchange among central bankers; conducts monetary, economic, and financial research, and acts as an agent or trustee for international financial settlements.

Economic and Monetary Union

Forex Hound Team — Sun, 20 Jan 2008 12:59:00 EST

In order to enjoy the benefits of increased economic integration, 11 European countries formed the Economic and Monetary Union (EMU) and began using a common currency, the euro, on January 1, 1999. At the same time, each of the countries yielded its ability to conduct its own monetary policy to the European Central Bank (ECB), located in Frankfurt, Germany, which now conducts monetary policy for the EMU. The primary objective of the ECB is to "maintain price stability," and the Bank is instructed not to "seek or take instructions from . . . any government of a Member State or from any other body."

The Federal Reserve in the International Arena

Forex Hound Team — Sat, 19 Jan 2008 13:02:00 EST

As the central bank of the United States, the Federal Reserve plays a variety of roles in the international arena. By influencing interest rates, the Fed's monetary policy affects the foreign exchange value of the dollar. Also, when the U.S. monetary authorities decide to intervene in the FX market, it is the Fed that executes the intervention. The Fed also provides various services—including carrying out FX intervention, and FX securities transactions in the U.S. market—to more than 200 foreign central banks, foreign governments, and international official institutions.

The Discount Window

Forex Hound Team — Fri, 18 Jan 2008 15:30:00 EST

Federal Reserve Banks lend funds to depository institutions at the discount window. All depository institutions that maintain transaction accounts or nonpersonal time deposits subject to reserve requirements are entitled to borrow at the discount window. These include commercial banks, thrift institutions, and United States branches and agencies of foreign banks. Prior to the passage of the Depository Institutions Deregulation and Monetary Control Act of 1980, discount window borrowing generally had been restricted to commercial banks that were members of the Federal Reserve System.

Federal Funds

Forex Hound Team — Thu, 17 Jan 2008 16:09:00 EST

Fed funds are unsecured loans of reserve balances at Federal Reserve Banks between depository institutions. Banks keep reserve balances at the Federal Reserve Banks to meet their reserve requirements and to clear financial transactions. Transactions in the fed funds market enable depository institutions with reserve balances in excess of reserve requirements to lend them, or “sell” as it is called by market participants, to institutions with reserve deficiencies. Fed funds transactions neither increase nor decrease total bank reserves. Instead, they redistribute bank reserves and enable otherwise idle funds to yield a return. Technical details on fed funds are described in Regulation D.

Open Market Operations

Forex Hound Team — Wed, 16 Jan 2008 16:15:00 EST

Open market operations are one of three basic tools used by the Federal Reserve to reach its monetary policy objectives. The other tools are changing the terms and conditions for borrowing at the discount window and adjusting reserve requirement ratios. The execution of OMOs in the "open market"—also known as the secondary market for securities purchases—is the Federal Reserve's most flexible means of carrying out its objectives. By adjusting the level of reserve balances in the banking system through open market operations, the Fed can offset or support permanent, seasonal or cyclical shifts in the supply of reserve balances and thereby affect short-term interest rates and by extension other interest rates.

Primary Dealers

Forex Hound Team — Tue, 15 Jan 2008 16:23:00 EST

Primary dealers are banks and securities broker-dealers that trade in U.S. Government securities with the Federal Reserve Bank of New York. On behalf of the Federal Reserve System, the New York Fed's Open Market Desk engages in the trades in order to implement monetary policy. The purchase of Government securities in the secondary market by the Open Market Desk adds reserves to the banking system; the sale of securities drains reserves.

Repurchase and Reverse Repurchase Transactions

Forex Hound Team — Mon, 14 Jan 2008 16:27:00 EST

Among the tools used by the Federal Reserve System to achieve its monetary policy objectives is the temporary addition or subtraction of reserve balances via repurchase and reverse repurchase agreements in the open market. These operations have a short-term, self-reversing effect on bank reserves.

Reserve Requirements

Forex Hound Team — Sun, 13 Jan 2008 16:30:00 EST

Reserve requirements are the portion of deposits that banks may not lend and have to keep either on hand or on deposit at a Federal Reserve Bank

Seasonal Borrowing

Forex Hound Team — Sat, 12 Jan 2008 16:34:00 EST

Federal Reserve Banks began extending seasonal credit in 1973 to help small depository institutions overcome strains placed on their reserves by seasonal pressures. Seasonal credit is one of three types of credit available at the Federal Reserve's discount window. The other two types are primary credit and secondary credit.

System Open Market Account

Forex Hound Team — Fri, 11 Jan 2008 16:36:00 EST

The System Open Market Account consists of the Federal Reserve's domestic and foreign portfolios. The SOMA domestic portfolio consists of U.S. Treasury securities held on both an outright and a temporary basis. The SOMA foreign currency portfolio consists of investments denominated in euros and yen.