The primary responsibility of the Federal Reserve Bank is establish the monetary policy. However, the bank has other tasks that will be discussed below in detail.
The Federal Reserve Bank is a regional branch of the Federal Reserve System. This system, in turn, is the central banking one operating in the United States, consisting of twelve banks. The main goal of the Federal Reserve System is promoting the stability of the American financial system and the health of the country’s economy.
As mentioned above, one of the main responsibilities of the Federal Reserve System is establishing the monetary policy. Monetary policy in America is associated with the actions that advocate for stable prices, a high employment level, and long-term interest rates. These are the three economic aims that the Federal Reserve should pursue under the supervision of the Congress.
The Federal Reserve Bank manages the country’s monetary policy in the following way. It maintains the low level of short-term interest rates, which affects long-term ones indirectly. Moreover, using such an approach the Federal Reserve Bank controls the exchange rates and prices of equities. This way, the bank can affect cost of credit and availability of the economy. Through such a strategy, the organization also controls production, inflation, business investment, and household spending.
The other functions and responsibilities of the Federal Reserve Bank include:
- Lending money to other banks to cover possible seasonal business cycles, liquidity demands, and fund deficits;
- Establishing and managing deposit accounts of the federal government;
- Clearing payments between financial organizations;
- Acting as depositories;
- Conducting paybacks of federal debt.
Moreover, the Federal Reserve Bank is responsible for promoting the safety of individual financial institutions and the stability of the banking system in general.