Penulis : Know The Fed and FOMC (1)
judul artikel : Know The Fed and FOMC (1)
Know The Fed and FOMC (1)
For forex traders, the word 'Fed' certainly is not foreign. Almost all know that the Fed is an abbreviation of the Federal Reserve System, the United States central bank, a very important role in determining the direction of the United States economy and also the US currency. This article will briefly review what is actually done to the Fed decision can greatly affect the forex market, how it works, and what the role of the Federal Open Market Committee (FOMC), which is part of the Fed.
Glimpse of the Fed
The Federal Reserve System or the Federal Reserve based in Washington DC This was established by the United States Congress on December 23, 1913 This institution was 'keeper' of the economy and is part of the United States federal government. As central banks the Fed set keauangan all institutions in the United States. The Fed is a network (network) which consists of 12 Federal Reserve Banks and their branches. Overall they are overseen by a board of governors of the Fed.
In addition to functioning as a central bank, the Fed also conducts research and studies on economic trends in the United States to support the monetary policy make the right decisions. The Fed is an independent institution, means it can make its own decisions without government approval. But Congress may question the decision if considered inappropriate, and the head of the Fed regularly testimony before the Senate. Fed Chairman nominated by the president and must obtain approval from the Senate. Theoretically, the Fed must be free from political pressure.
What is the Fed doing?
The Fed's main task is to strive for the level of economic growth in accordance with the target, low unemployment, regulate the rate of inflation and price stability to maintain the purchasing power (purchasing power) US dollar, and determine the interest rate is most appropriate to support the passage of the economy. As central banks the Fed also supervises the health of commercial banks both in accommodating customer funds or to extend credit.
The Fed also plays an important role in check clearing, payment processing is done electronically, distribute banknotes and coins to banks and financial institutions, as well as overseeing the inter-bank transactions. Research and studies the Fed regarding the overall economic conditions and regionally publicized through articles, seminars, websites, and speeches by top brass. The distribution of this information is also the task of the Fed.
Two important publications of the Fed is always considered by market participants are:
1 Beige Book
So named because the report covers bundle brown. This analysis report is published 8 times a year, based on the results of interviews with economists, analysts, businessmen and directors of the bank in some states, and further highlight the regional economic conditions.
2 Fed Minutes
This report presents the views of the FOMC members at the meeting. Often includes detailed differences between members and why each one is ended with a vote. Voting results were striking differences will greatly affect the movement of the USD. Fed Minutes are also released 8 times per year is very attention of market participants money and capital markets.
The history of the founding of the Fed
Before the Fed stood up in December 1913, in the United States experienced two periods of different central banking system is much simpler than the Fed. First in 1791 and second in 1816 both have a goal to prevent the economic collapse of the United States. However, because the central bank concerned will be very decisive and powerful in their policy, the United States Congress failed to approve the realization of the establishment of the central bank. Also in 1836 president Andrew Jackson refused to extend the validity period of the central bank in the fall of 1816 was only after a series of banks occurred in 1873, 1893 and 1907, the United States Congress seriously considering forming a central bank. As time the congress conclusion: 'A central bank was necessary in the United States to prevent bank panics 1907 incident happen again.'
Run monetary policy of the Fed
The Fed determines monetary policy to maintain the economic health of the United States. Run policy is to determine the interest rates and the money supply to spur economic growth and avoid recession. If growth needs to be accelerated and employment needs to be propagated, the Fed will provide loans to commercial banks for distribution.
Another way the Fed to increase the money supply is by buying government securities such as bonds and others. This method is commonly called quantitative easing (QE). Conversely, if the economy grows too quickly considered and inflation rose sharply, then the Fed will raise interest rates and reduce or stop buying government securities, thus reducing the money supply.
The organizational structure of the Fed
In the organizational structure of the Federal Reserve, the United States consists of 12 districts. Each district has a bank called the Reserve Bank, which is not a commercial bank, but an arm of the Fed. Each Reserve Bank is headed by a president. The 12 districts are Boston, New York, San Francisco, Philadelphia, Cleveland, Chicago, Richmond, St. Louis, Minneapolis, Atlanta, Kansas City, and Dallas.
Board of Governors oversees the work of the Fed as a whole. Consists of 7 members appointed by the president and approved by the Senate. Board of governors led by the head and deputy head of the Fed who is also appointed by the president and approved by the Senate. Old post of head and deputy head is 4 years, and can be extended.
Is the FOMC?
The FOMC is a group within the Fed makes monetary policy decisions. FOMC stands for Federal Open Market Committee. The FOMC consists of 12 members.
7 members of the board of governors, four members selected from among 11 Reserve Bank presidents, and a permanent member is the president of the Federal Reserve Bank of New York. To the 4 members served for a year in rotation among 11 people.
FOMC meeting held 8 times a year to determine the interest rate and decide whether the central bank will reduce or increase the money supply by selling or buying government securities. The final decision is usually determined by means of FOMC voting (voting) among its members.
Where does the Fed get funding?
Most of the income derived from the Fed open market operations (open market operation), especially of interest portfolio securities and proceeds from the sale of securities. Besides, the Fed also earn revenue from services such as financial transactions, and other electronic payment processing. The Fed's assets as of July 2011 is around USD 3 trillion, but the majority of the Fed's profits paid to the finance department of the United States (US Treasury).
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