Question

What type of policies does the Federal Reserve Bank set to combat periodic economic swings?

What type of policies does the Federal Reserve Bank set to combat periodic economic swings?

Answer 1

Definition of Federal Reserve Bank

The U.S. Federal Reserve, also known as the Fed, is the central bank for the nation. The Fed also performs critical tasks in helping shape economic policy in the U.S., especially in establishing benchmark interest rates that banks, lenders, businesses, and individuals use to engage in commerce, and borrow and lend money. Most recently, the Fed made a decision to cut its benchmark lending rate by 50 basic points to counter the economic impact of the coronavirus outbreak.

Function of Federal Reserve Bank

The Act has several key components and responsibilities that drive the Fed forward, including:

Steering the U.S. economy

According to the Federal Reserve's web site, the Fed does so "by influencing money and credit conditions in the economy in pursuit of full employment and stable prices."

Providing Stability

The Fed is also tasked with injecting stability into the often unstable worlds of politics and commerce, and is especially focused on assessing potential economic risk in U.S. and global financial markets.

Regulating Banks

The Federal Reserve also regulates and oversees U.S. financial institutions (especially bank ) to help provide clear, efficient and ethical channels between customers and the financial services industry. A high priority is protecting consumers from financial institutions that may try and take advantage of them.

Acting as the Government's Bank

The Federal Reserve also provides specific financial services to the federal government, and to U.S. and international financial institutions, while also steering the U.S. payments systems.

POLICIES OF FEDERAL RESERVE BANK

The Federal Reserve Banks offer a wide range of payment services to banks and other depository institutions. These services include distributing and receiving the nation's currency and coin, collecting checks, and electronically transferring funds among banks, such as through Fedwire and the automated clearinghouse. The Federal Reserve charges for many of these payment services; the pricing is carried out according to federal statute and Federal Reserve Board policies.

The Federal Reserve in the Payments System
This policy sets forth the rationale for the Federal Reserve System's participation in the payment mechanism, describes the System's procedures for evaluating Federal Reserve priced services to depository institutions, and states the System's objectives for the pricing of such services.

Statutory Authority for Services Pricing Policy
Sections of the Federal Reserve Act relating to the pricing of services, as amended by the Monetary Control Act of 1980.

Principles for the Pricing of Federal Reserve Bank Services
Principles for Reserve Banks in pricing their payment services, as required by the Monetary Control Act.

Federal Reserve System Guidelines for the provision of Financial Services

This policy elaborates on the pricing principles for the Reserve Banks.

Standards Related to Priced-Service Activities of the Federal Reserve Banks
This policy outlines safeguards for avoiding internal conflicts of interest between the exercise of the System's responsibilities for providing priced services to depository institutions and the carrying out of its other responsibilities.

Fee Schedules for Federal Reserve Bank Payment Services
Notice of Board approval of the 2020 private sector adjustment factor (PSAF) and fee schedules for Federal Reserve priced services and electronic access.