THE FEDERAL RESERVE

Good afternoon traders, it's an amazing Sunday afternoon and I hope you're all doing well and enjoying your Sunday with friends and family. Today I'd like to focus on a topic that is very crucial for traders which is the Federal Reserve. Traders know that the Federal Reserve bank is the Central Bank regulating the US dollar. Last week, the Fed released their interest rates on Wednesday where they maintained their rates at 5.50% during the FOMC meeting. Most traders only know of the FED but don't know of the structure of the Federal Reserve so let's get into it. 

The Federal Reserve System comprises of three key entities which are:
1. Federal Reserve Board of Governors
2. 12 Federal Reserve Banks
3. Federal Open Market Committee

The Federal Reserve Board of Governors comprises of seven governors who are nominated by the President of the United States and confirmed in their positions by the U.S Senate.
The Federal Open Market Committee (FOMC) has 12 voting members who are :
1. 7 members of the Board of Governors of the Federal Reserve System.
2. The President of the Federal Reserve Board of New York.
3. 4 of the remaining 11 Reserve Bank presidents on a 1 year rotational basis.

The key functions of the Federal Reserve are :
1. Conducting the nation's monetary policy.
2. Helping maintain the stability of the financial system.
3. Supervising and regulating financial institutions.
4. Fostering payment and settlement system safety and efficiency.
5. Promoting consumer protection and community development.

The Fed has 3 key policy rates and they are :
1. Target Federal Funds Rate - Rate at which banks lend/borrow amongst themselves on an unsecured basis.
2. Discount rate - Rate charged by the Fed when lending funds to members to deal with short-term shortages of liquidity on a collaterized basis.
3. Interest on Required Reserve Balances and Excess Balances - Rate the Fed pays to member institutions for their reserve deposits.

As traders it's important to understand how the Federal reserve works, their functions, and how their speeches affect the markets we trade especially on all USD pairs.