United States Federal Reserve (US Fed)

Learn about the United States Federal Reserve, the central banking system of the U.S., responsible for formulating monetary policy, regulating banks, maintaining financial stability, and fostering economic growth.

Table of Contents

Context: US President Donald Trump has expressed a desire to remove current Chair Jerome Powell over policy disagreements.

About United States Federal Reserve (US Fed)

The United States Federal Reserve is the most powerful economic institution in the United States.
It is responsible for managing monetary policy and regulating the financial system.

Structure of the Federal Reserve System

Board of Governors (Washington, D.C.)
- 7 members, appointed by the President, confirmed by the Senate.
- Chair (currently Jerome Powell) and Vice Chair are chosen from among them.
- Tenure: 14 years (Chair serves a 4-year renewable term).
- It oversees the entire Federal Reserve System and sets broad policies.
12 Regional Federal Reserve Banks:
- Conduct research, supervise banks, and participate in monetary policy implementation.
Federal Open Market Committee (FOMC):
- Main policy-making body for monetary decisions (e.g. interest rates).
- Meets 8 times a year to decide on monetary policy stance.
Mandate:
- Price Stability – keeping inflation under control.
- Maximum Sustainable Employment – keeping unemployment low.
Independent within Government: Not under White House control, but accountable to Congress.

Comparison between US Fed & RBI

Feature	US Federal Reserve	Reserve Bank Of India
Establishment	1913 (Federal Reserve Act)	1935 (RBI Act, 1934)
Headed by	Fed Chair (Jerome Powell)	RBI Governor (Sanjay Malhotra)
Appointment	President of USA (Confirmed by Senate)	Union Government (Appointments Committee of the Cabinet)
Tenure	Chair – 4 Years (Renewable), 14 Years (Governor)	3 Years (Extendable)
Main Mandate	Price stability + Employment	Inflation targeting + Monetary stability
Policy Body	Federal Open Market Committee (FOMC)	Monetary Policy Committee (MPC)
Ownership	Independent public institution	Owned by the Government of India (Nationalisation in 1949)
Directions	Govt. cannot directly issue directions to the Fed	Union govt. Can issue directions in the Public Interest (Section 7 RBI Act)
Removal	For cause (misconduct or incapacity), not for policy disagreements.	Not explicitly defined, influenced by the government.