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09 23 2015 | by Victor Xing | Central Banks

What is the Federal Reserve and what does it do?

The Federal Reserve is responsible for formulating and implementing U.S. monetary policyto meet its congressional mandated objectives (a.k.a the dual mandate):

  1. Price stability (inflation mandate)
  2. Maximum employment (employment mandate)

In addition to its monetary objectives, the FED is also tasked with regulatory responsibilities, including (but not limited to) implementing Basel III, Dodd-Frank stress tests, and supervising banks and other important financial institutions.

Finally, the FED also provide financial services to domestic and foreign government agencies (for example, New York Fed’s gold custody service), as well as overseeing the U.S. Payment Systems.

Many people are familiar with the FED’s monetary policy responsibilities, including the FOMC meetings, Federal Funds Rate decisions, Fed Chair’s press conference, as well as various unconventional policies.

As part of the Federal Reserve System, the 12 regional Federal Reserve Banks jointly implement FED monetary policies set forth by the FOMC.

If you take a closer look at the below sample U.S. banknote, the “B2” on the left indicates that it is issued by the New York Fed (FED 2nd district) and backed by its assets.

Federal Reserve bank note
Federal Reserve bank note

 

Next article09 22 2015 | by Victor Xing | Central Banks

As of late 2015, which Central Banks are engaged in quantitative easing?