Introduction
The Federal Reserve System is the American central bank which was established by the Congress in 1913 to offers the United States with a secure, supple, and more steady fiscal and financial system. The system has three components, each with its distinct roles: the Board of Governors, Federal Open Market Committee (FOMC), and Open Market Operations.
Roles of the Fed
The Federal Reserves has four significant duties. Fed manages inflation. The system controls inflation by regulating credit through the moderation of long-term interests’ rates. Another role is maintaining the constancy of the Fiscal Organization. Working closely with the Treasury Department, the Fed prevented the global financial collapse during the 2008 financial crisis. Fed created several tools, including the Term Auction Facility, Quantitative Easing, and the Money Market Investor Funding Facility (Zaring, 2015). Last, the Fed offers Banking Services by buying US treasury from the Federal Government. It plays a role in adding money into the Money Supply.
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Role of the Board of Governors and the Federal Open Market Committee
Fed’s Board of Governors is responsible for the Interest Rates. The board monitors the fiscal strategy action, analyze national and global economic and financial environments. It also leads committees that deal with existing issues, including banking laws and electronic business (Zaring, 2015). On the other hand, the role of the Federal Open Market Committee is to formulate policies intended to stimulate steady and economic progress. The committee manages the money supply.
Effects
Fed controls the level of cash reserves needed by banks for lending and use. In the case of inflation, the Fed increases the interest rates to squeeze off spending and borrowings of the customers. It reduces the buying activities to control the amount of money in banks.
Personal Opinion
I agree with the government of the Fed. Government is responsible for promoting the economy and preventing the occurrence of activities like inflation that would destroy the economy. Conclusively, the Fed develops and implement the law. It also acts as a government bank and even generates revenues to perform government activities.
References
Zaring, D. (2015). Law and custom on the federal open market committee. Law & Contemp. Probs. , 78 , 157.
