You may have heard about the Federal Reserve or The Fed before but are unsure who they are and what they do. However, they control much of the government's response to the economy, so it's well worth your time to understand the Federal Reserve. So let's get started!
What to Know About the Federal Reserve
Learn more about who the Federal Reserve is, and how their choices impact your financial health.
Who is The Fed?
The Federal Reserve put very simply, is the central bank of the United States that also tries to manage the economy and make it safer for consumers. There are three main groups that make up the Federal Reserve System according to their structure map:
- The Board of Governors: This is "an agency of the federal government that reports to and is directly accountable to Congress, provides general guidance for the System and oversees the 12 Reserve Banks."
- The Federal Reserve Banks: These are the operating arms of the system and are supervised by the Board of Governors.
- The Federal Open Market Committee (FOMC): Members of the Board of Governors and Reserve Bank presidents, with the chair of the committee, is the FOMC chair.
These three entities help make choices that ultimately work towards strengthening the United States economy and the financial system as a whole.
What does The Fed do?
It was first created in 1913 to support the domestic economy and make the financial system safer for the consumer. To this day, this is their goal. The Fed achieves this by encouraging high employment and economic growth, all while trying to keep an eye on inflation. Despite the fact that the Fed is connected to Congress, it's not a government institution and is not funded by taxpayers.
Key functions
The Federal Reserve has several key functions. One of the main ones is a monetary policy structure. This is how the Federal Reserve tries to control the state of the economy. They control the supply of money that is circulating throughout the nation. This impacts interest rates, inflation and other factors of the financial system. Other functions include:
Impacts for you
Because the Federal Reserve can control the money supply, their choices can affect how much interest you will earn in most accounts, loans and credit cards. The economy affects so many other parts of life like employment, mortgage rates, stock prices and retirement. Interested in keeping watch on the choices that the Federal Reserve is making each month? Read their "Recent Developments" page.
If you are ready to learn more about your finances and how to prepare for the future? Reach out to Vectra Bank today to get started!
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