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Introduction to the Federal Reserve definitions

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  • Federal Reserve
    U.S. central bank established in 1913 to prevent financial crises and ensure stability in the banking system.
  • Central Bank
    Institution responsible for overseeing monetary policy and regulating the financial system of a country.
  • Board of Governors
    Seven-member leadership group appointed for 14-year terms, serving as the main authority within the Federal Reserve.
  • Chairperson
    Leader of the Board of Governors, appointed for a four-year term and often reappointed by the president.
  • Federal Reserve Banks
    Twelve regional entities located in major U.S. cities, each with its own board and president, regulating local banks.
  • Federal Open Market Committee
    Group of twelve members, including governors and regional presidents, responsible for decisions on money supply.
  • Monetary Policy
    Actions taken to control the money supply and influence economic conditions, mainly through the FOMC.
  • Bank Failure
    Situation where a financial institution cannot meet withdrawal demands due to insufficient funds.
  • Bank Run
    Event where many depositors simultaneously withdraw funds, fearing insolvency, causing liquidity issues.
  • Lender of Last Resort
    Role of providing emergency loans to banks facing financial distress to prevent collapse.
  • Discount Loan
    Funds provided by the Federal Reserve to banks at a special interest rate to address short-term needs.
  • Discount Rate
    Interest charged by the Federal Reserve on loans made directly to banks.
  • Federal Funds Rate
    Interest rate for overnight loans between banks, used to meet reserve requirements.
  • Reserve Requirement
    Regulation mandating banks to hold a certain percentage of deposits as reserves.
  • Open Market Operations
    Buying and selling of securities by the Federal Reserve to adjust the money supply in the economy.