What Does the US 'Fed' Do? (Fed, FRB, FOMC)

The US "Fed" is short for the Federal Reserve System. Like the Bank of Korea in Korea, it serves as the central bank of the United States. The Fed is not a single institution, though. It is made up of several bodies, and we'll look at each one in turn.

The US Federal Reserve (Fed), Federal Reserve Board (FRB), Federal Open Market Committee (FOMC)

Composition and Role of the Fed

The Federal Reserve System decides and announces US monetary policy. The Fed consists of the Federal Reserve Board (FRB), the Federal Open Market Committee (FOMC), and 12 Federal Reserve Banks.

Structure of the US Federal Reserve System. Image source: Investopedia

What the FRB Is and What It Does

The Federal Reserve Board is called the FRB (Federal Reserve Board of Governors) for short, and it is the Fed's highest decision-making body. It has 7 members in total. They are appointed by the President and confirmed by the Senate. The Board also has a Chair. The current Chair is Jerome Powell, and the term is 4 years.

The FRB manages and supervises the 12 Federal Reserve Banks. It also sets the reserve requirement ratio. This is the share of customers' deposits that banks are required to keep in their vaults. When it goes up, the money supply in the market shrinks, and when it goes down, the money supply grows.

What the FOMC Is and What It Does

One of the terms you'll hear most often in the news is probably the FOMC. FOMC stands for "Federal Open Market Committee." The long name may make it look complicated, but it is simply the body that runs the Fed's monetary policy meetings and reaches the decisions made there.

The FOMC plays a key role in deciding the US money supply and whether to adjust interest rates. Its regular meetings are usually held 8 times a year, in January, March, April, June, July, September, October, and December.

The FOMC is made up of the 7 FRB governors and 5 Federal Reserve Bank presidents. The 12 Federal Reserve Banks take turns participating, one year at a time. The president of the New York Fed, however, is always a member.

The 12 Federal Reserve Banks

There are 12 Federal Reserve Banks in the US. The country is divided into 12 Federal Reserve Districts, and each district has its own Federal Reserve Bank. The 12 banks are in New York, Dallas, Richmond, Minneapolis, Boston, San Francisco, St. Louis, Chicago, Atlanta, Kansas City, Cleveland, and Philadelphia. Together, they are called the Federal Reserve Banks.

Wrapping Up

The Fed serves as the central bank of the United States. The FRB is its decision-making body, made up of the Fed's 7 core governors. The FOMC is the body that runs the monetary policy meetings attended by the FRB board and 5 Federal Reserve Bank presidents. There are 12 Federal Reserve Banks in the US. Altogether, the Fed is made up of the FRB, the FOMC, and the 12 Federal Reserve Banks.