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The U.S. Federal Reserve

The most closely watched central bank in the world today is the U.S. Federal Reserve. The Federal Reserve, also called the “Fed,” was created in 1913 by Congress, which divided the country into 12 districts and established within each a District Federal Reserve Bank. These banks are overseen in Washington, D.C. by the Federal Reserve's Board of Governors, which has seven members appointed by the president to 14-year terms. The length of the term is intended to ensure stability and independence between presidents. The Chairman of the Board, however, is appointed by the president to a renewable four-year term.

The Fed's most important organization is the Federal Open Market Committee (FOMC), which, among other things, sets short-term interest rates. Each member of the Board of Members also serves on the FOMC, along with the president of the New York Reserve Bank and four other district bank presidents. The FOMC meets roughly once a month to discuss and review the economy and policy. Each member has one vote on setting economic policy.


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