Monetary Policy and the Federal Reserve – Federal Reserve

What Fed Does and What it ought to be Doing?

Fed is an independent United States central banking system which was established in 1913 after the enactment of the Federal Reserve Act. Fed main duty is to execute the monetary policy of the nation Fed is responsible for executing and formulating depository, regulating and supervising depository institutions, offering an elastic currency, helping the financial operations of the federal government, and serving as the U.S. government banker. Moreover, Fed contains an essential role in operating systems of nation payment, safeguarding the rights of consumers while dealing with banks and enhancing community reinvestment and development. Therefore, Fed is responsible of controlling the economic status of the country, defining the banks rending rates, the minimum deposit rate before receiving a loan and thus defining the country’s economic status (Fed, 2015).

Read also United States’ Response Great Recession and Impact of Economic Policies Implemented on the Market 

Policies Fed Need to Impose

Fed is responsible of defining monetary policy which involves Fed influence to the cost and availability of credit and money to assist in enhancing national the non-inflationary growth economic goal. Fed employs three tools to instrument monetary policy open market operations being the most essential one. The two other tools include operations of discount window that give secured short-term loans to depository institutions with temporal funds requirement. The third tool is reserve requirements which establish the demand deposit proportions accounts and time deposits which have to be held as Fed non-interest bearing reserves (Fed,2015).

Consequences of Some of the Policies

The Fed policies basically the financial position of the country and thus the company’s economic status. The three monetary policy tools determine the flow of funds in the market. In this regard, Fed can regulate inflation and recession in the country. Some of these policies therefore are responsible of inflation like the recent 2008 recession that was brought about by poor lending policies.

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