The Fed - What does it mean that the Federal Reserve is "independent within the government"? (2023)

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What does it mean that the Federal Reserve is "independent within the government"?

The Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress. The Chair and other staff testify before Congress, and the Board submits an extensive report—the Monetary Policy Report—on recent economic developments and its plans for monetary policy twice a year. The Board also makes public the System's independently audited financial statements, along with minutes from the FOMC meetings.

The Federal Reserve does not receive funding through the congressional budgetary process. The Fed's income comes primarily from the interest on government securities that it has acquired through open market operations. After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.

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The Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. The Congress also structured the Federal Reserve to ensure that its monetary policy decisions focus on achieving these long-run goals and do not become subject to political pressures that could lead to undesirable outcomes. So, members of the Board of Governors are appointed for staggered 14-year terms, and the Board Chair is appointed for a four-year term. Elected officials and members of the Administration are not allowed to serve on the Board.

Related Information

Press Release
January 10, 2017
Federal Reserve Board announces Reserve Bank income and expense data and transfers to the Treasury for 2016

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The Fed - What does it mean that the Federal Reserve is "independent within the government"? ›

The Fed is independent in the sense that monetary policy and related decisions are made autonomously and are not subject to approval by the federal government. However, its governors are appointed by the President and must be confirmed by Congress.

Why is the Federal Reserve independent quizlet? ›

Why is the Federal Reserve independent of Congress? The president created the Federal Reserve. Congress could not reach a compromise when it created the Federal Reserve. Congress wanted the money supply to be free from political control.

Why is the Federal Reserve not independent of government quizlet? ›

The Federal Reserve is not independent of the government because: -The president appoints the Federal Reserve chairperson from among the Federal Reserve Board of Governors.

Why is it good that the Fed is independent? ›

Congress has determined the Federal Reserve can best achieve its mission of supporting maximum employment and stable prices as an independent agency that makes decisions based on the best available evidence and analysis, without taking politics into consideration.

How is the Federal Reserve designed to be independent of the rest of the government quizlet? ›

the fed is more independent because its substantial revenue from securities and discount loans allows is to control its own budget.


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2. Should central banks be independent? | CNBC Explains
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3. Yellen Stresses the Importance of an Independent Fed
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4. The Federal Reserve's Political Independence Explained
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5. How The Federal Reserve Was Created
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