Federal Reserve definition

The Federal Reserve bank, or the ‘Fed’ for short, is the central bank in charge of monetary and financial stability in the United States. It is part of a wider system – known as the Federal Reserve system – with 12 regional central banks located in major cities across the US.

The Federal Reserve system was founded in 1913 as a response to a series of major panics surrounding the state of the US economy. Its key monetary policy decisions are made by the FOMC, or Federal Open Markets Committee, who meet eight times a year. It is during these meetings that the base interest rate for the United States is set.

The Federal Reserve is independent from the US government, and its decisions do not have to pass through any governmental persons or institutions before becoming ratified. Its Board of Governors is still appointed by the President, however.

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