The Central Bank

The Central Bank is an institution responsible for managing monetary policy.

While the primary responsibilities of central banks are similar across countries, their organizational structures may differ.

For instance, in the United States, the central bank is the Federal Reserve System, commonly known as the Federal Reserve or the Fed.

The Fed has three parts.

First, the Federal Reserve Board of Governors is a government body based in Washington, D.C. It has seven members, called governors.

Next, the system includes twelve Federal Reserve Banks, also called the Reserve Banks, located across the country.

Finally, the Federal Open Market Committee, or the FOMC, includes twelve Federal Reserve officials. The FOMC is the main body responsible for monetary policy. It sets the target federal funds rate, which affects borrowing costs throughout the economy.

In some regions, a single central bank manages monetary policy for several countries. For example, the European Central Bank manages monetary policy for the Eurozone countries that use the euro as their common currency.