Every region or nation has a central body that is responsible for overseeing its monetary and economic policies. These bodies help make sure that the financial system in the country financial system remains stable. Such a body is known as the central bank. These institutions are not market-based or competitive like commercial and investment banks. Kavan Choksi UK says that central banks are rather concerned with inflation. The Federal Reserve or the Fed and the Bank of England (BoE) are two major central banks in the world.
Kavan Choksi UK Briefly Discusses the Functions of The Fed and The BoE
The Federal Reserve, widely known as the Fed, basically is the central bank of the United States. It can arguably be considered to be the most influential central bank in the world as well. As the United States dollar is used for almost 90% of all of the world’s currency transactions, the sway of the Federal Reserve has a sweeping impact on the valuation of several currencies.
The Fed is responsible for ensuring the efficient operation of the United States economy, while also keeping the best interests of the public in mind. The Fed majorly focuses on promoting monetary policy and maintaining financial stability in the country. It has a pivotal role to play in preserving the soundness of individual financial institutions, and also promotes the safety of payment and settlement systems. The Fed also oversees consumer protection.
The Fed is made up of three distinct groups, the Board of Governors, the Federal Reserve Banks and the Federal Open Market Committee or FOMC. Fed’s Board of Governors works independently of the U.S. government but reports directly to Congress. They are responsible for maintaining the goals of the Fed. Every board member serves on the FOMC. The chair of the FOMC is the head of the Federal Reserve Board.2 The FOMC meets 8 times a year, to review economic conditions, the stability of the financial system, and monetary policy.
The Bank of England (BOE) is the central bank of the United Kingdom. The BOE is publicly owned. This basically means that it reports to the British people through its parliament. BoE was founded in the year of 1694, and is often touted as one of the most effective central banks in the world. The mission of the BoE is to maintain the stability of the monetary and financial systems in the UK. This central bank has an inflation target of 2%. If prices surpass that level, the BOE will take steps to curb inflation. On the other hand, a level much below 2% is likely to prompt the central bank to take measures to boost inflation. Kavan Choksi UK says that the BoE helps ensure the soundness of the financial institutions in the United Kingdom, and the security of its currency. It also strives to maintain a financial system that is free from unnecessary risk.
The monetary policy committee of the BoE comprises of nine members. It includes a governor, three deputy governors, a chief economist, as well as four outside experts. This committee meets eight times a year to announce findings and policy.
