The Federal Reserve System
Информация - Экономика
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terest on the existing system, foreign currency investments, interest on loans to depository institutions, as well as fees for the provision of services to depository institutions.paying all the costs the Federal Reserve Banks send the remains of their income to the treasury. Revenues and expenditures of the Federal Reserve banks from 1914 to the present day are included in the Annual Report of the Governing Council. If the Reserve Bank is liquidated for any reason, all income after payment of bills sent to the treasury.
The Committee on Open Market (Federal Open Market Committee - FOMC)Federal Open Market Committee (FOMC), a component of the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations. It is the Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money supply. It is the principal organ of United States national monetary policy. (Open market operations are the buying and selling of United States Treasury securities.) The Committee sets monetary policy by specifying the short-term objective for those operations, which is currently a target level for the federal funds rate (the rate that commercial banks charge between themselves for overnight loans). The FOMC also directs operations undertaken by the Federal Reserve System in foreign exchange markets, although any intervention in foreign exchange markets is coordinated with the US Treasury, which has responsibility for formulating US policies regarding the exchange value of the dollar.the Fed makes its first steps in the economic practice of the United States, nobody seriously considered the open market operations as a sort of instrument control and economic relations. At this time the Fed to purchase securities of the federal government primarily in order to get enough of a profitable asset, if the profits from giving the federal reserve banks loans and advances is, for whatever reasons, inadequate. Most of the Federal Reserve Banks felt that the most convenient venue for such transactions is a New York City, and it is here in the twenties informal committee composed of representatives from all twelve Federal Reserve Bank, begun to coordinate their actions on securities the federal government. While almost immediately after its inception, this body began to affect the state of the economic system, compensating through appropriate purchase and sale of securities circulation of yellow metal in the economy and create additional reserves for the system of private banks, legislative activity, the Federal Open Market Committee (FKOR) has been executed and legalized only after the adoption of the Banking Act 1935.Open Market Committee directs open market operations in securities. At their meetings the members FKOR considering current economic conditions and determine the most appropriate in their view of monetary policy and the direction of its development. After this, the Federal Open Market Committee is preparing a directive order to manage ongoing operations in the open market, which is also the vice-president of the Federal Central Bank of New York. This order does not specify its further actions on the open market itself decides where, how and how much to buy or sell securities of the federal government. Legislative available only outlines the proposed direction of monetary policy and sets the values and levels of key parameters of the banking system, such as the level of free reserves, the sale rate the Federal Reserve and several other parameters of the monetary and credit relations. In turn, current operations manager on the open market is taking the necessary purchases or sales of securities of the federal government needed to achieve the objectives of the policy before it. [See 5 p. 29]
2010 Members of the FOMC
o Ben S. Bernanke, Board of Governors, ChairmanWilliam C. Dudley, New York, Vice ChairmanJames Bullard, St. LouisElizabeth A. Duke, Board of GovernorsThomas M. Hoenig, Kansas CitySandra Pianalto, ClevelandSarah Bloom Raskin, Board of GovernorsEric S. Rosengren, BostonDaniel K. Tarullo, Board of GovernorsKevin M. Warsh, Board of GovernorsJanet L. Yellen, Board of Governors
Alternate MembersCharles L. Evans, ChicagoRichard W. Fisher, DallasNarayana Kocherlakota, MinneapolisCharles I. Plosser, PhiladelphiaChristine M. Cumming, First Vice President, New York [see 16 p.29 ]
2. Monetary policy of Federal Reserve System
.1Monetary Policy and the Economy
main objectives of monetary authorities in the U.S. .S. monetary policy has two main objectives:
) stimulating production and employment
) maintaining a "stable" prices. These goals are listed in the adopted in 1977 amendments to the Federal Reserve System. the economy develops in a cyclical output and employment levels are regularly above or below the projected long-term trend. Despite the fact that monetary policy can not affect the production or employment in the long run, in the short term it under her power. For example, when the demand for industrial products is reduced and there comes a recession, the Fed can stimulate economic growth - of course, time - and help the economy closer to the long-term levels of production by lowering interest rates. Therefore, in the short term, the Fed and other central banks are taking measures to stabilize the economy, resulting in levels of production and employment in relative conformity with the projected long-term economic growth. question arises: if the Fed can stimulate the economy out of recession, why it cannot stimulate the economy all the time? In fact, successive attempts to accelerate economic growth, placing them beyond the long-term levels, put pressure on the factors limiting the performance, which will result in more and higher inflation, not accompanied by long-term decline in the unemployment rate or an increase in output. In other words, the policy of continuing to support economic growth not only bring the country long-term benefits, but also to make people pay for high inflation. pressure has a negative impact on the economy because, on the one hand, promotes the growth of interest rates on long-term loans, with another - creates a situation of uncertainty for businesses and consumers, greatly complicating long-term planning. In addition, high inflation distorts the meaning of economic decisions, leading to an arbitrary increase or decrease in the rate of profit after tax in the various sectors of the economy. , ensuring price stability is one of the main goals of the Fed. While monetary policy cannot make the economy grow faster than capacity allows long-term growth, or reduce the level of unemployment in the long term, but it can stabilize prices across longer time periods. the Fed can influence the average rate of inflation in the economy, some experts and some members of Congress, emphasized the need to define the objectives of monetary policy in the task of maintaining price stability. However, fluctuations in levels of output and employment is also costing the public dearly. In practice, the Fed, like any central bank has to control not only inflation but also about economic growth in the short term.main objectives pursued by the Fed tend to contradict each other. One of the contradictions arise when deciding on what the purpose is of paramount importance at a time. For example, suppose that during a recession the Fed takes measures to prevent the excessive rise in unemployment. Short-term success in this area could result in long-term problems if the monetary policy for too long will be aimed at stimulating employment, since it would lead to higher inflationary pressures. Therefore, it is very important for the Fed to find a balance between short-term stabilization and long-term objective for low inflation. Fed controls the rate of inflation or influence output and employment levels through changes in the cost of short-term loans. Impact on the level of interest rates is carried out mainly through open market operations and the federal funds rate, both these methods work in the market of bank reserves, also called the federal funds market. accordance with the law, banks and other depository institutions (for brevity, they are all in this material are referred to as "Bank") to create specific funds that can be used to meet unexpected cash outflows. These funds are in cash held in banks' vaults or as deposits at the Fed. Currently, banks are obliged to keep from 3% to 10% of funds held in interest-bearing and interest bearing checking accounts as reserves, depending on the total dollar amount available on such accounts in each bank. In addition, banks can generate additional reserves required for settlements as "overnight" and other payments. in need of additional short-term reserves can borrow them from other banks, which currently have excess reserves. Such loans are made on the so-called federal funds market and interest rates on short-term loans is determined by the federal funds rate, which is the "target". Manipulation of the rate and change in reserves leads to a corresponding adjustment of interest rates, money market, which ultimately allows you to balance the demand for cash and cash offer. Thus, the increase in excess reserves, supplied to the market federal funds, leading to a drop in interest rates, and vice versa.can also borrow reserves from the Federal Reserve Banks use the so-called Discount window" and the interest rate, which is set for these loans is called the discount rate. Total number of funds, the adopted through the "discount window", as a rule, very small, because the Fed does not encourage such loans, except in cases where banks borrow to offset the short-term shortage of reserves.