Question

Describe the functions performed by Federal Reserve Banks?

Answer 1

Introduction:

Federal Reserve Bank is central bank of U.S. it is known as “Fed”. The aim behind fed was effective operations in country’s economy in public interest. It is supreme financial authority in US. It was founded in 1913 by congress.

• Following are main functions of Fed:

Promoting financial system stability in US:

Fed observes the link between investors and financial institutes. It works to minimize the risk in financial market and tries to stabilize the financial system by monitoring all internal as well as external effects and influences, it tries to prevent any crisis may arise in future.

Conducting monetary policy:

This in main function performed by the Fed. It conducts monetary policy in public interest by stabilizing prices, increasing employments, decreasing interest rates and preventing US from bad effects of inflation, it tries to minimize inflation.

Projecting payment system and safety:

As Fed provides services to financial depositories and US government it ensures the safe and secure payment system for people Fed acts strictly in public interest in payment and settlement system.

Regulating financial system and financial institutions:

The Federal Reserve banks monitors activities of financial institutions and prevents whole country from any negative effect in public interest. It is very much helpful in boosting public’s interest in banking system of any country.

Promoting consumer safety and community development:

Consumer plays vital role in any economy, and consumer rights have leading importance in a financial services sector. Fed monitors consumer’s rights and financial institute’s activities to protect consumer rights. Laws are formed to protect consumer from any exploitation.