The Federal Reserve Act (FED): A Case Study

This role is achieved through the implantation of the monetary policies. According to Arnold (2008), Fed has several tools at it disposal that it uses in the monetary polices. These are; the open market operations which involve buying and selling U.S government securities in the financial markets. Further the bank is charged with the responsibility of determining the required reserve ratio. This ratio is given to the commercial banks dictating the minimum amounts that they should hold in to their accounts as deposits and for lending. Finally the Fed sets the discount rates putting in to consideration the overall market rates s well as desired effect on borrowing that the Fed seeks to achieve. In addition to these three major roles, as a bank, the Federal Reserve Bank can play the roles played by the commercial banks as the rules are not entirely prohibitive as far as this duty is concerned.

The act stated that its purposes were "to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." After the implementation of the Federal Reserve, several laws were passed to supplement it. Some of the key laws affecting the Federal Reserve Act are the Banking act of 1935; the Employment Act of 1946; the 1970 amendments to the Bank Holding Company Act; the International Banking Act of 1978; the Full Employment and Balanced Growth Act of 1978; the Depository Institutions Deregulation and Monetary Control Act of 1980; the Financial Institutions Reform, Recovery, and Enforcement Act of 1989; and the Federal Deposit Insurance Corporation Improvement Act of 1991. In two of the above-named acts, Congress defined the main goals of national economic policy. These acts are the Employment Act of 1946 and the Full Employment and Balanced Growth Act of 1978. The main goals of the Federal Reserve are economic growth, a high level of employment, stable prices, and moderate long-term interest rates. The Federal Reserve System is considered to be an independent central bank. It is an independent central bank only in the sense that its decisions do not have to be passed by the

United States Federal Reserve system, also known as Federal Reserve or simply “Fed” is the United States central banking system. The Federal Reserve took inception in 1913, after the adoption of the Federal Reserve Act. The United States Congress has mandated three macroeconomic objectives to the Federal Reserve. These are minimum levels of unemployment, prices stability and keeping in check the rates of interests. Over the years, the role of Federal Reserve has expanded. It now formulates the country’s monetary policies, conducts supervision and regulation of the banking institutions, maintenance of the financial

They must purchase capital stock in their District Reserve Bank, entitling them to a six percent stock dividend, thus issuing them the right to vote for six of the nine Directors of that District Bank. Within this structure there was the Monetary Control Act of 1980 which imposed a reserve requirement on all depository institutions, which allows them to borrow and receive other services from the Fed. This remains beneficial because by enabling banks to borrow reserves from the Reserve Banks the liquidity of the entire banking system is increased.

Under normal circumstances, the Federal Reserve would manipulate the economic situation by manipulating the reserves and by changing the target interest rate (Keister and McAndrews (2009). However, the Federal Reserve has bypassed

Inflation targeting provides high degree of clarity and responsibility allowing reserve bank not to deviate from the systematic and rational monetary policy

Usually this goal is "macroeconomic stability" - low unemployment, low inflation, economic growth, and a balance of external payments. Monetary policy is usually administered by a Government appointed "Central Bank", the Bank of Canada and the Federal Reserve Bank

On the other side, the Federal Reserve can employ more transparent and gradual monetary policy measure that can help leaders in emerging market economies planning their own policy changes to combat high volatility of capital flows.

Central banks should be independent of the short-term political interests and political influences generally in setting economic policies.

Report by central bank in the UK. The former would give the central bank more scope

The European Central Bank (ECB) is the central bank for Europe’s single currency, the euro. The ECB’s main objective is to maintain the euro’s purchasing power, and therefore price stability, in the euro area, which comprises of the nineteen European Union countries that have introduced the euro currency since 1999 (ECB, 2015d). The ECB and the national central banks of the Member States, whose currency is the euro, together constitute the Eurosystem; the monetary authority of the euro area. In order to maintain price stability, the Eurosystem undertakes the necessary economic and monetary analyses and adopts and implements appropriate policies in order to respond to monetary and financial developments (ECB, 2015e). This essay will analyse the possible impacts of quantitative easing (QE), recently introduced by the European Central Bank. Firstly, I will look at the European Central Bank’s use of interest rates in controlling the growth of the economy. Secondly, I will look at the meaning and purpose of QE, and finally, I will analyse the impact of the programme of QE recently launched by the European Central Bank.

The creation of the European Union (EU) is a great political and economic feat. For it is the ultimate sign of cooperation between nations that had been in constant rivalry before. Nevertheless, the ideals of such a union cannot stand alone without having a strong foundation and continuos rational decision making by all of the actors involved. If we assume that the European Central Bank’s (ECB) principle role is to guarantee the well-being of all EU members, then policy making becomes a very complex issue since it must consider such a large and diverse area. I believe there needs to be more economic integration between EU countries for monetary [and fiscal] policy of the ECB to be

CBL is the primary institution which overlooks the inaction of the monetary policy in the country. While CSL ensures that the key policy decisions are taken and implemented, they also play a role of the regulator to the country’s banks and other such institutions. CBL website (2010) indicates the key tools they use for the purpose:

Open market operations play an important role in steering interest rates, managing the liquidity situation in the market and signaling the monetary policy stance. Open market operations are initiated by the ECB, which decides on the instrument and the terms and conditions. It is possible to execute open market operations on the basis of standard tenders, quick tenders or bilateral procedures. Open market operations can differ in terms of aim,

To ensure accountability, the CBT provides information to the public, to the Parliament and to the Government periodically regarding monetary policy implementation. 8 Monetary Policy Strategy - Transparency Increasing transparency makes monetary policy more predictable, more effective and more credible in order to attain the final objective. Expectations become more sensitive to the Central Bank’s decisions.  Political transparency: Clear-cut goals; inflation targets,  Transparency in monetary policy: Written announcements such as change in short-term interest rates,  Operational transparency: Openness in interventions in markets and policies,