DSST Money & Banking Part 1

Fomc open market operations the federal open market

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FOMC & Open Market Operations:  The  Federal Open Market Committee  (FOMC), a component of the  Federal Reserve System , is charged under United  States law with overseeing the nation's  open market operations . It is the principal organ of  United States national   monetary policy . (Open market operations are the buying and selling of  government securities .) The Committee sets  monetary policy  by specifying the short-term objective for those operations, which is currently a target level for the  federal   funds rate  (the rate that commercial banks charge between themselves for overnight loans). The FOMC also directs  operations undertaken by the Federal Reserve System in foreign exchange markets, although any intervention in foreign  exchange markets is coordinated with the U.S. Treasury, which has responsibility for formulating U.S. policies regarding  the exchange value of the dollar. FOMC Membership  The Federal Open Market Committee was formed by the  Banking Act of 1933 , and did not include  voting rights for the Board of Governors. The  Banking Act of 1935  revised these protocols to include the Board of  Governors and to closely resemble the present-day FOMC, and was amended in 1942 to give us the current structure of  twelve voting members [1] : the seven members of the  Federal Reserve Board  and five of the twelve  Federal Reserve Bank  
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presidents. The  Federal Reserve Bank of New York  president always sits on the Committee, and the other presidents  serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of banks, one bank  president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas;  and Minneapolis, Kansas City, and San Francisco. All of the Reserve Bank presidents, even those who are not currently voting members of the FOMC, attend Committee  meetings, participate in discussions, and contribute to the Committee's assessment of the economy and policy options.  The Committee meets eight times a year, approximately once every six weeks. Open market operations  are the means of implementing  monetary policy  by which a  central bank  controls its national  money supply  by buying and selling government  securities , or other  financial instruments . Monetary targets, such as  interest rates  or  exchange rates , are used to guide this implementation. [1] Since most money is now in the form of electronic records, rather than paper records such as banknotes, open market  operations are conducted simply by electronically increasing or decreasing ('crediting' or 'debiting') the amount of money  that a bank has, e.g., in its reserve account at the central bank, in exchange for a bank selling or buying a financial 
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