Federal Reserve [Fed;FOMC]

The Federal Reserve System (the Fed) is the central bank of the United States, created in 1913 to provide a safer, more flexible monetary and financial system. It consists of the Board of Governors in Washington D.C., 12 regional Federal Reserve Banks, and the Federal Open Market Committee (FOMC). The Fed’s responsibilities include conducting monetary policy to achieve maximum employment and price stability (2% inflation target), supervising and regulating banks, maintaining financial system stability, and providing financial services to the government. For example, the Fed’s response to COVID-19 included cutting rates to zero, purchasing trillions in bonds, and establishing emergency lending facilities. The FOMC meets eight times yearly to set monetary policy, particularly the federal funds rate. The Fed’s balance sheet expanded from $900 billion in 2008 to over $8 trillion through quantitative easing. Fed decisions influence global markets, with its ‘dot plot’ projections closely watched. The Fed operates independently within government but remains accountable to Congress.