Most Federal Reserve officials continue to expect the central bank to increase interest rates some time next year, according to the bank’s projections. In the forecast, 14 of 17 officials said they continue to believe the Feds first increase in near zero short-term rates will occur in 2015. One official believes the Fed should boost rates this year, while two think the central bank can hold off until 2016. The September forecasts represent a modest shift from Junes projections, when one hoped the Fed would lift rates this year, while 12 saw 2015 as the most likely point of lift off. Monetary policy of the Federal Reserve System is based partially on the theory that it is best overall to expand or contract the money supply as economic conditions change. Banking institutions in the United States are required to hold reserves, amounts of currency and deposits in other banks, equal to only a fraction of the amount of the banks deposit liabilities owed to clients and general customers. One way to lessen the likelihood and the effect of bank runs is to have a money supply that can expand when money is needed. The use of the term elastic currency in the Federal Reserve Act does not imply only the ability to expand the money supply, but also the ability to contract the money supply. The Federal Banking Agency Audit Act, enacted in 1978 as Public Law 95-320 and 31 U.S.C. section 714 establish that the Board of Governors of the Federal Reserve System and the Federal Reserve banks may be audited by the Government Accountability Office ( GAO ). The GAO has authority to audit check-processing, currency storage and shipments, and some regulatory and bank examination functions, however there are restrictions to what the GAO may audit. Audits of the Reserve Board and Federal Reserve banks may not include: 1. transactions for or with a foreign central bank or government, or nonprivate international financing organization; 2. deliberations, decisions, or actions on monetary policy matters; 3. transactions made under the direction of the Federal Open Market Committee; or 4. a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to items ( 1 ), ( 2 ), or ( 3 ) respectively. There are 12 Federal Reserve Banks located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Each reserve Bank is responsible for member banks located in its district. The size of each district was set based upon the population distribution of the United States when the Federal Reserve Act was passed.
Posted on: Sat, 01 Nov 2014 13:16:09 +0000
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