The Monetary Powers Of The Federal Reserve

The Board of Governors controls monetary policy because it controls the Federal Open Market Committee which determines monetary policy

. The reason is that there are only 12 voting members on this committee, seven governors and five district bank presidents and simply put the board has the majority votes. The board also sets reserve requirements within the limits set by legislation and effectively sets the discount rate.

Depending on what these rates are we'll determine which currency enjoys thebest forex trading. The board chairman advises the president on economic policy, testifies on the state of the economy before Congress and may from time to time represent the US government in negotiations with foreign countries on economic matters.

The board has a large staff of well-trained economists that advises it on economic policy matters and researches important economic questions. In recent years many of the board members and usually the chairman have been trained economist. The Federal Open Market Committee consists of the seven members of the Board of Governors of the Federal Reserve System plus five presidents of the Federal Reserve banks. The president of the Federal Reserve Bank of New York is a permanent member. This apparent inequity exists because the Federal Reserve Bank of New York implements monetary policy on a day-to-day basis. The Federal Open Market Committee is extremely important because it is this group of people that actually determines monetary policy and news of such will be disseminated to traders as forex trading tips.

The Federal Open Market Committee monetary actions directly affect the reserve balances of depository institutions and ultimately the country's level of economic activity. If if the actions of the Fed dramatically affect the economic conditions of a country then doesn't it stand to reason that they are to some degree largely responsible for the economy of the country? That answer is pretty clear.

by: Rhab Hendrik

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