La Federal Reserve turns 107 today. Established by the US Congress on December 23, 1913, the American Central Bank, however, had to wait another three years before becoming fully operational.
The distrust of politicians towards too centralized solutions led to the choice of a decentralized structure, Federal reserve system, able to receive impulses from the various areas of the country and thus respect the federalist vocation of the United States. In essence, at the heart of the organization was a central bank headquartered in Washington, to which they were added 15 regional banks. The new institution was placed under the authority of the Government and the Secretary of the Treasury entered the board of the Fed by right.
When it burst the crisis of 29, the Federal Reserve mistakenly pursued a tight monetary policy, which aggravated the consequences of the depression. To correct a system that had shown evident limitations, in 1935 the Bank Act, which transformed the Federal Reserve Board in Board of Governors, which was given a controlling power over the regional banks. The Federal Open Market Committee was also established, the committee that decides monetary policy, especially as regards interest rate trends.
The international monetary system created with the agreements of Bretton Woods of 1944 gave the dollar and the Federal Reserve the pivotal role of the system. A trim that ended in 1971, when US President Richard Nixon ended the convertibility of the dollar into gold.
Another decisive reform came at the end of the seventies (with the Federal Reserve Reform Act of 1977 and with theHumphrey–Hawkins Full Employment Act of 1978), when the Fed was given specific objectives that were independent of the Government's economic policy: price stability , long-term growth.
Finally, on August 20, the current Fed chairman, Jerome Powellhe announced an epochal revolution: for the next 5 years, the Central Bank will allow inflation to temporarily rise above 2%. “Furthermore – added Powell – we remain strongly focused on fostering the strongest possible labor market for the benefit of all Americans”.
