The US Federal Reserve announced yesterday, Wednesday, March 16, 2022, that it will raise interest rates by 0.25%.

The US bank's decision to raise interest rates came at a time when the economy is facing a new state of uncertainty caused by the outbreak of the Corona virus and Russia's war on Ukraine.

What is the story of the US Federal Reserve, which is the most powerful financial institution in the world?

Birth and founding

1791: The Central Bank of the United States is established.

The US Federal Reserve or the Federal Reserve is the central bank of the United States located in the capital, Washington, and the currency of its system is the US dollar.

December 23, 1913: The Federal Reserve Congress is established, which is responsible for the country's fiscal policy, maintaining stability and the national currency, securing money, and controlling interest rates on loans. It also plays the role of savior for banks by lending them during crises.

The establishment of the American Central Bank came as a reaction to the economic crises experienced by the country, especially the crisis of 1907, and with the passage of time the roles, responsibilities and structure of the bank expanded, and among the prominent events that led to a change in the Federal Reserve system: the Great Depression of 1930.

The world is affected by the decisions of the US Central Bank, and this is evident when it decides to reduce or raise the interest rate, as the money of investors in the world flows to the emerging economies when interest rates are raised in America in search of profit, and vice versa.

structuring and shaping

The structure of the Federal Reserve consists of a central management body that is the Board of Governors of the Bank, along with it 12 federal banks that bear responsibility in a specific geographical area of ​​the American soil, which are banks: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.

The Board of Governors of the Bank includes seven members whose term of office is 14 years, appointed by the US President and approved by the Senate.

The board determines the financial policy of the bank.

Its seven members are part of the 12 members that make up the Federal Open Market Committee (FOMC) which determines monetary and credit policy in the United States.

Domains and tasks

It is the entity responsible for the country’s financial policy, maintaining stability, the national currency, securing money, and controlling the interest rate on loans. It also plays the role of savior for banks by lending them during crises.

The Central Bank has the authority to supervise the work of banks to ensure that they are not following a fraudulent or reckless policy.

The Board determines the bank's fiscal policy, and its seven members are part of the 12 members that make up the Federal Open Market Committee (FOMC), which determines monetary and credit policy in the United States.

The work of the US Central Bank is focused on four main areas: managing the helm of all monetary policy by influencing the terms of lending and the money market to ensure the functioning of the US economy at its full potential, and to maintain price stability and moderate interest rates in the long term.

The Federal Reserve was also given the authority to regulate and supervise the work of American banks to ensure that they do not follow a fraudulent or reckless policy, ensure the banking and financial system, and protect the rights of consumers in the field of loans.

- This institution is also keen to ensure the stability of the financial system and contain any risks threatening this system.

The US Central Bank provides financial services to depository institutions, the US government, and official foreign institutions.

Independent Foundation

The Federal Reserve is an independent institution, because it is not necessary for the US President or any government official to approve the decisions and policies of the Bank, but it is subject to congressional oversight.

The Federal Reserve must work within the economic framework set by the US administration, and the fiscal policy objectives that this administration adopts.

The interest rate applied to government-issued securities is the main source of revenue for the Central Bank, to which are added other resources represented in the interest applied to foreign investments and loans granted to depository institutions, and fees applied to services such as check clearing (network payments) and money transfer.

The financial crisis.. 2008

The role of the Federal Reserve emerged after the outbreak of the global financial crisis in 2008, as it was one of the four institutions that oversaw the plan to save the American banking system from collapsing as a result of the crisis.

The remaining institutions are: the Secretary of the Treasury, the Chairman of the Securities and Exchange Commission, and the Congressional General Accounting Office.

- The plan is to inject seven hundred billion dollars into the banking system to save it, and thus save the entire American economy and the world as well.

September 2012: The Federal Reserve launched a major financial stimulus for the American economy by purchasing debt linked to a mortgage worth forty billion dollars per month, which is called the “quantitative stimulus” program, and then the program expanded later in quantity and quality, as the bank became also buying Long-term government bonds, raising the value of purchases to 85 billion dollars per day.

- The objective of this unconventional step was to reduce long-term interest rates to revive the loan market and public spending and encourage investments, reduce the unemployment rate by 6.5% at least, and control the inflation rate at a level of 2.5% or less.

The asset purchase program lasted for two years.

November 2014: The Bank decided to bring the curtain down on one of the most important experiments in the field of monetary policy, and the impact of the quantitative easing program on the US economy and the global economy has remained a matter of debate.

Federal Reserve Chairs

Charles Sumner Hamlin (1914 - 1916)

Roy A.

Young (1927 - 1930)

Eugene Mayer (1930-1933)

Eugene Robert Black (1933 - 1934)

Mariner S. Eccles (1934-1948)

Thomas B. McCabe (1948 - 1951)

William Martin (1951 - 1970).

Arthur F.

Burns (1970 - 1978).

J.

William Miller (1978 - 1979)

Paul Volcker (1979 - 1987).

Alan Greenspan (1987 - 2006).

Ben Shalom Bernanke (2006 - 2014)

Janet Yellen (2014-2018)

Jerome Powell (2018 -....)