Federal Reserve

The Federal Reserve is the central banking system of the United States created on December 23, 1913, responsible for supervising the commercial and savings banks of its region to ensure their compliance with the regulation.

There are three tools for the Federal Reserve to control monetary policy: Open market operations, Discount Rate and Reserve requirements. Using these three tools, the Fed will affect the demand and supply of the balance held by the Federal Reserve Bank’s depository institutions, thereby changing the interest rate of the Federal Fund.