The Federal Reserve: Who We Are, What We Do. Christopher J. Neely.

Slides:



Advertisements
Similar presentations
Federal Reserve. What is the Federal Reserve $Central Bank of the United States $Created by Congress with the passage of the Federal Reserve Act in 1913.
Advertisements

The Federal Reserve In Action
Federal Reserve and Macroeconomic Policy
Test Your Knowledge Monetary Policy Click on the letter choices to test your understanding ABC.
The Federal Reserve System Monetary Policy. Functions of the Federal Reserve System 1.Financial Services a.The “banker’s bank” 2.Supervise and Regulate.
The Fed and The Interest Rates
LESSON 24 THE FED’S TOOLBOX 24-1 HIGH SCHOOL ECONOMICS 3 RD EDITION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY Bank reserves: Currency held by banks.
Monetary Policy and the Federal Reserve System
The Federal Reserve System
Money in the Economy Mmmmmmm, money!. Monetary Policy A tool of macroeconomic policy under the control of the Federal Reserve that seeks to attain stable.
The Federal Reserve System and Monetary Policy
Monetary Policy: Goals & Targets Chapter 18. Goals of Monetary Policy Goals 1.High Employment 2.Economic Growth 3.Price Stability 4.Interest Rate Stability.
The Fed’s Toolbox What tools does the Federal Reserve System have at its disposal? The Fed’s Toolbox.
©2009, The McGraw-Hill Companies, All Rights Reserved 4-1 McGraw-Hill/Irwin Chapter Four The Federal Reserve System, Monetary Policy, and Interest Rates.
MONEY, BANKS, AND THE FEDERAL RESERVE. Objectives After studying this chapter, you will able to  Explain why fiat money exists and why it is important.
The Federal Reserve Started in 1913 is response to yet another financial crisis Is Quasi-public Serves three purposes Regulates the payment system Supervises.
The Federal Reserve How our Central Bank is structured.
Government & the U. S. Economy What does the government do to keep the U.S. economy from acting like a roller coaster: INFLATION rising prices & increasing.
Money, Monetary Policy and Economic Stability
Chapter 14: Monetary Policy  Objectives of U.S. monetary policy and the framework for setting and achieving them  Federal Reserve interest rate policy.
Federal Reserve Economic Systems Economic Terms Trade $100 $200 $300 $400 $500 $100 $200 $300 $400 $500 $100 $200 $300 $400 $500 $100 $200 $300 $400.
Chapter 15 The Federal Reserve System & Monetary Policy
Monetary Policy and you: You can do this! AP PHS March 5, 2011.
The Federal Reserve System
Monetary Policy Review
1. Review Money Market and Loanable Funds Market HW and Practice FRQ 2. Notes: The Federal Reserve System Unit 3 Exam is postponed until Monday/Tuesday.
Monetary Policy Tools. Monetary Policy Federal Reserve Act of 1913 created the Federal Reserve System –“The Fed” provides the U.S. banking system with.
Chapter 15: Monetary Policy
Federal Reserve System Benjamin Bernanke Former Chair Former Chair Janet Yellen Current Chair Current Chair.
Chapter 15 Parks Econ104 The Federal Reserve and Monetary Policy.
Do Now: What do you already know about the Federal Reserve?
The Federal Reserve In Action. What is the Fed?  Central bank of the United States  Established in 1913  Purpose is to ensure a stable economy for.
MONETARY POLICY QUIZ ▪ Identify a score keeper and timer(could be one person or the teacher). ▪ Divide into teams and choose a representative to respond.
Government Chapter 20.2 Monetary Policy. General Economics competition The existence of two or more companies within a single industry that are trying.
Eco 200 – Principles of Macroeconomics Chapter 14: Monetary Policy.
The Federal Reserve In Action. What is the Fed?  Central bank of the United States  Established in 1913  Purpose is to ensure a stable economy for.
FOMC. GDP Review economics/uploads/newsletter/2013/PageOneCE0513. pdf
MGT 470 Ch 15 Central Banks (cs3ed) v1.0 Oct 15 1 The Central Bank of the USA is the Federal Reserve System (the “Fed”) The Functions of Central Banks.
The Federal Reserve System and Monetary Policy. Money Final payment for goods and services Purposes of money: – Medium of Exchange: It can be used to.
The Federal Reserve In Action. What is the Fed?  Central bank of the United States  Established in 1913  Purpose is to ensure a stable economy for.
Today’s Topic: Fiscal Policy What is fiscal policy? –The taxing and spending policies of our national government Who controls fiscal policy? –Congress.
The Federal Reserve In Action. What is the Fed?  Central bank of the United States  Established in 1913 (Federal Reserve Act of 1913)  Purpose is to.
Actions of the Federal Reserve
Chapter 5 – Central Banks BA 441 – Financial Markets and Institutions.
a. Describe the organization of the Federal Reserve System.
Monetary Policy It influences the Model of the Economy.
GOVERNMENT POLICY: MONETARY & FISCAL POLICY 1 Adapted from James R. Russell, Ph.D., Professor of Economics & Management, Oral Roberts University ©2005.
Federal Reserve History Structure Functions –M–Monetary Policy –B–Banking Supervision –F–Financial Services Federal Reserve Banks.
The Federal Reserve. Federal Reserve Act of 1913  Created 12 regional independent banks.
Monetary Policy & The Federal Reserve
Actions of the Federal Reserve
Federal Reserve System
Basic Finance The Federal Reserve
The Federal Reserve and Monetary Policy
Sponge Quiz #1: In Year 1, the cost of a market basket of goods was $720. In Year 2, the cost of the same basket was $780. What was the consumer price.
Federal Reserve (Monetary Policy).
Federal Reserve and Central Banking
Economics Unit 4 Lesson 6 The Federal Reserve and Monetary Policy.
Monetary Policy.
Actions of the Federal Reserve
Terms to Know Bank reserves: Currency held by banks in their vaults plus their deposits at Federal Reserve Banks. Required reserves: Funds that a depository.
Monetary Policy & Politics
The Federal Reserve In Action
Monetary Policy.
4/19/16 AIM: How does the federal government protect national economic interests? Do-Now: What type of economic system does the United States have?
The Federal Reserve and Monetary Policy
BANKING & MONETARY POLICY
The Federal Reserve.
Government Policy: Monetary & Fiscal Policy
Monetary policy Monetary: relating to money or currency
Presentation transcript:

The Federal Reserve: Who We Are, What We Do. Christopher J. Neely

Disclaimer: The views expressed are my own and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis, or the Federal Reserve System.

What is the Federal Reserve System? The Federal Reserve is the central bank of the United States. A central bank is the government agency that oversees the banking system and is responsible for the amount of money and credit in the economy.

What are the Federal Reserve’s responsibilities? 1. To regulate bank holding companies and state chartered banks. 2. To supply money and credit to the economy to maintain stable prices and full employment. 3. To ensure the smooth functioning of the payments system. 4. To act as the government’s bank.

How does the Federal Reserve differ from other central banks? Not all central banks have responsibility for bank regulation or the payments system. The Fed is exceptionally decentralized. – Authority is vested in the Board of Governors and the Presidents of the 12 regional reserve banks.

How does the Federal Reserve differ from other central banks? The Fed is more independent of elected officials than most central banks. The new European Central Bank shares many of the characteristics of the Federal Reserve System. –Decentralized, independent.

Structure of the Federal Reserve F. Mishkin, THE ECONOMICS OF MONEY AND THE ECONOMIC POLICY REVIEW. (c) 1998 Frederic S. Mishkin. Reproduced by Addison Wesley Longman. All rights reserved.

Structure of the Federal Reserve F. Mishkin, THE ECONOMICS OF MONEY AND THE ECONOMIC POLICY REVIEW. (c) 1998 Frederic S. Mishkin. Reproduced by Addison Wesley Longman. All rights reserved.

The Fed’s Objectives “Stable prices” “Maximum employment” Moderate long-term interest rates

The Fed’s Monetary Policy Tools The federal funds rate The discount rate Reserve requirements

The Fed’s Main Tool The federal funds rate –An interbank overnight interest rate How does the Fed control it? –Open Market Operations: Buying and selling U.S. government securities to raise and lower the interest rate. –OMO change the amount of “base money,” cash plus bank reserves with the Fed.

The Fed’s Main Tool What are the consequences? –Lower interest rates/more money leads to more spending and investment, higher prices in the long run. –Higher interest rates/less money leads to less spending and investment, lower prices in the long run. –Volatile monetary policy leads to uncertainty about future economic conditions and discourages economic activity.

Output and Inflation What is the relationship between inflation and employment? – Expansive monetary policy can cause both temporarily higher employment and permanently higher prices. – Low unemployment does not cause inflation. An environment of stable prices is the best way to promote employment in the long run.

What does the Fed control? In the short run, the Fed can mostly control real economic activity. – This is called “monetary neutrality.”

What does the Fed control? In the long run, the Fed can only change the average rate of inflation. –“Inflation is always and everywhere a monetary phenomenon.” — Milton Friedman

International Cooperation While the U.S. Treasury has ultimate legal responsibility for foreign exchange intervention, in practice the Federal Reserve shares that responsibility. The Federal Reserve maintains swap lines with foreign governments and central banks.

Questions and Answers What is the outlook for the U.S., Japanese and European economies? –Is the U.S. in a bubble economy? Is the Fed a “World Central Bank?” Can the Fed take credit for the expansion? What caused the financial crisis of 1998? Is a strong dollar or a weak dollar better for the U.S.?

The End