Forex Dictionary Terms

Federal Reserve

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Definition – What does Federal Reserve mean?

The Federal Reserve is the central banking system for the United States. The Federal Reserve was created in 1923 as a way for the U.S. to avoid widespread financial panic. Over the years, the Federal Reserve has grown, but its stated objectives are still maximum employment, stable prices and moderate long-term interest rates. Like many central banks, the Federal Reserve uses monetary policy tools such as interest and inflation rate targets to influence the economy. The Federal Reserve is more properly known as the Federal Reserve System, but commonly referred to as the Fed.

ForexTerms explains Federal Reserve

The Fed is made up of a central agency and 12 Federal Reserve Banks that act in concert to carry out monetary policy by buying and selling Treasury bonds, acting as a lender of last resort and so on. The Federal Reserve is very influential when it comes to the value of the U.S. dollar. Because the U.S. is the world’s largest economy and the USD is a reserve currency, the actions the Fed takes to ease or tighten monetary policy has ripple effects throughout the entire forex market.

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