Federal Reserve Open Market Operations Essay -- Economics Fed Market

federal countenance Open merchandise Operations SUMMARY The Federal throws run st locategy for implementing monetary policy involves interest rate targeting through clear market operations. The Federal curb does not utilize earmark requirements or the discount rate as part of this dodge. Open market operations involves the buying and selling of securities in the open market, in order to catch reserve balances. By manipulating reserve balances, the Federal Reserve can manipulate the price of reserves in the market. The price of reserves is known as the Federal Funds rate. The Federal Funds rate is the interest rate banks charge each other for lending and/or borrowing reserve balances. This paper will discuss how the Federal Reserve implements a strategy of interest rate targeting through open market operations.Part I Introduction The Federal Reserve Bank is the central bank of the coupled States. In 1913, Congress created the Federal Reserve body to provide perceptual constancy to the pecuniary and monetary system. The Federal Reserve Bank (from here on, referred to as the FED) has four main functions. They conduct monetary policy by influencing money supply in the economy, in order to maintain all-inclusive employment, price stability, and promote economic growth. They regulate and supervise banking institutions to ensure the resort and soundness of the U.S. financial and banking system. The FED also provides financial and banking services to the U.S. Government, the public, and to financial institutions. And lastly, the FED maintains stability in the financial system by cut down systemic risks that may arise in the markets. The Federal Reserve System is made up of the Board of Governors and twelve regional Federal Reserve banks. The Board of Governors consists of seven members who argon appointed by the President of The unify States, and must be confirmed by the Senate. All seven governors are members of the Federal O pen Market Committee (FOMC), and each vote on the conduct of open market operations. The network of twelve regional banks performs dissimilar functions, including operating a nationwide payments system, distribution of currency and coin, supervising and modulate member banks, and serving as banker for the United States Treasury. The Federal Open Market Committee (FOMC) is a major part of the Federal Reserve... ... Trends - The Funds stray Target and Interest Rates - September 1999. http//www.stls.frb.org/docs/publications/mt/1999/cover9.pdf - 12-13-99The Dwindling superpower of Rate Cuts.http//www.nytimes.com/2001/10/03/opinion/03wed1.htmlOctober 3, 2001.Another Rate Cut From the Fed.http//www.nytimes.com/2001/12/12/opinion/12wed2.htmlDecember 12, 2001.Hess, Diane. 2001. Fed Paints Real Rates a Deeper Shade of Red.http//www.thestreet.com/markets/taleofthetape/10005186.htmlDecember 11, 2001.Task, Aaron L., 2001. Cutting Spree May Dull Feds Blade.http//www.thestreet.com/marke ts/aarontaskfree/10003583.htmlNovember 06, 2001.SpeechesMeyer, Laurence H., 2001. Remarks by Governor Laurence H. Meyer. Before the National Association of Business Economics. The Federal Reserve Board. November 27, 2001.Greenspan, Alan. 2001. Testimony of Chairman Alan Greenspan. Before the Joint Economic Committee, U.S. Congress. The Federal Reserve Board. October 17, 2001.Greenspan, Alan 2001. Testimony of Chairman Alan Greenspan. Before theCommittee on Financial Services, U.S. family line of Representatives. The Federal Reserve Board. July 18, 2001.