The Federal Reserve System (commonly known as the Fed) is the central bank of the United States — the world's most influential monetary authority — established by the Federal Reserve Act in 1913 to provide the US with a safe, flexible, and stable monetary and financial system. The Fed consists of three key components: the Board of Governors (seven members appointed by the US President), twelve regional Federal Reserve Banks across major US cities, and the Federal Open Market Committee (FOMC) — the monetary policy body that sets the federal funds rate (the benchmark short-term US interest rate) through periodic meetings, typically eight times per year. The Fed's dual mandate is to promote maximum employment and stable prices (targeting 2% inflation). Fed decisions have profound global implications — particularly for Indian financial markets — because the federal funds rate directly influences the US dollar's strength, global risk appetite, and capital flows between developed and emerging markets. When the Fed raises rates, the USD strengthens, US Treasury yields rise, FPI investors pull capital from Indian equities and bonds into higher-yielding US assets (triggering rupee depreciation and equity market selling), and RBI often faces pressure to adjust India's own interest rates to maintain adequate yield differentials. FOMC meeting outcomes and Fed Chair statements are among the most closely watched global macro events for Indian equity, bond, and currency market participants.
For android only
