Return

This lesson focuses on the September 21, 2011, press release by the Federal Reserve System's Federal Open Market Committee (FOMC) on the current Federal Reserve monetary policy actions and goals, as a result of the FOMC meeting on September 20-21, 2011. Specifically, the lesson reports the target rate for the federal funds rate and other Federal Reserve System monetary policy actions. This lesson is intended to guide students and teachers through an analysis of the actions the Federal Reserve is taking and can take in influencing prices, employment, and economic growth. Through this lesson, students will better understand the dynamics of the U.S. economy, current economic conditions, and monetary policies.

KEY CONCEPTS

Business Cycles, Discount Rate, Federal Reserve, Federal Reserve Structure, Macroeconomic Indicators, Monetary Policy, Open Market Operations, Recession, Reserve Requirements

STUDENTS WILL

  • Explain the meaning of the September 21, 2011, Federal Open Market Committee decision concerning the target for the federal funds rate.
  • Identify the current monetary policy goals of the Federal Reserve and the factors that have recently influenced monetary policy goals.
  • Explain the structure and functions of the Federal Reserve System, Federal Reserve banks, and the Federal Open Market Committee.
  • Identify the monetary policy options and other tools available to the Federal Reserve to stimulate or contract the economy.

Current Key Economic Indicators

as of May 5, 2013

Inflation

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers decreased 0.2 percent in March after increasing 0.7 percent in February. The index for all items less food and energy rose 0.1 percent in March after rising 0.2 percent in February.

Employment and Unemployment

Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent. Employment increased in professional and business services, food services and drinking places, retail trade, and health care.

Real GDP

Real gross domestic product increased at an annual rate of 2.5 percent in the first quarter of 2013 (that is, from the fourth quarter to the first quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 0.4 percent.

Federal Reserve

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent...

INTRODUCTION

The Federal Open Market Committee (FOMC) of the Federal Reserve System (Fed) meets approximately every six weeks to determine the nation's monetary policy goals and, specifically, to set the target for the federal funds rate (fed funds rate). The fed funds rate is the interest rate at which banks lend their balances at the Federal Reserve to other banks, usually overnight.

The FOMC has maintained the target federal funds rate at a range of 0 to 1/4 percent since its December 16, 2008 meeting.  The fed funds rate has been kept at this historically low level due to a long period of low and often negative real GDP growth, significant numbers of non-farm employment losses, and a persistently high unemployment rate.

This lesson focuses on the September 21, 2011, press release by the Federal Open Market Committee on the current Federal Reserve monetary policy actions and goals, following the FOMC's September 20-21, 2011, meeting.

[Note: In the first semester of the 2011-2012 school year (September-December), there will be three Focus on Economic Data lessons regarding the Federal Reserve and Monetary Policy. In addition to reporting the most recent FOMC decision, this focus on economic data will include an introduction to the structure and functions of the Federal Reserve System, the FOMC and monetary policy tools.

Lessons about the scheduled November1-2 and December 13 FOMC meetings, will address more specific issues of Fed policy tools, policy options, and new Fed programs to counter recessionary pressures and the current financial market problems.

On occasion, the FOMC holds unscheduled face-to-face or conference call meetings to make more timely policy decisions in response to unusual economic events or conditions.  The policy decisions made as a result of any of these unscheduled meetings will be included in the lesson on the next scheduled meeting.]

MATERIALS


Key Economic Indicators

as of September 21, 2011

Inflation

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in August (2011) on a seasonally adjusted basis. Over the last 12 months, the all items index increased 3.8 percent before seasonal adjustment. The "core" CPI, excluding food and energy prices, increased 0.2 percent in August, 2011.

Employment and Unemployment

Non-farm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1 percent. Employment in most major industries changed little. Health care continued to add jobs; a decline in information employment reflected a strike. Government employment continued to trend down.

Real GDP

Real gross domestic product increased at an annual rate of 1.0 percent in the second quarter of 2011,(that is, from the first quarter to the second quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.

Federal Reserve

The FOMC decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The FOMC also decided to purchase up to $400 billion of long-term securities and sell short-term securities in order to "put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative."

PROCESS

"Come on, baby, let's do the twist!"  Are these the lyrics to a number one hit song in 1960 or a way to describe the Federal Reserve's "maturity extension" monetary policy action in September, 2011? 

The answer: Both!

The hit song, "The Twist," was written by Hank Ballard and was the number one Billboard hit when recorded by Chubby Checker in 1960. It inspired a dance craze that continued into the 1060s and made Chubby Checker a star.

"Operation Twist" is the common name given to the Federal Reserve strategy of selling shorter-term Treasury securities and buying longer-term securities in order to lengthen the average maturity of its securities holding and reduce long-term interest rates. 

Operation "Twist" - A Historical Note

In March of 1961, the FOMC initiated policies with the goal of "nudging longer-term rates in a downward direction."  Operation Nudge, as it was referred to by the Federal Reserve at the time, included actions to reduce long-term interest rates to stimulate the economy.  At the time, Chubby Checker's "The Twist" was topping the record charts and the "twist" dance craze was beginning.   Observers used the "twist" to characterize the Fed's "nudge" actions and "Operation Twist" became the popular term for the Federal Reserve policy.

[Teachers: Note: "Operation Nudge" was described in minutes of the meeting of the Federal Open Market Committee, March 7, 1961, page 38.  ' ]

The FOMC announcement on September 21, 2011, revived the old "Operation Twist" strategy of selling short term and medium-term Treasury securities, and using the funds to purchase long-term treasury securities.  The intent is to lower long-term interest rates to encourage investment spending.  Lower long-term rates will appeal to potential home buyers and businesses seeking to invest.  Lowering interest rates is intended to encourage businesses to invest in new plants and equipment and hire more workers.  As incomes rise, consumers will begin to spend again. Will the lower rates be enough to encourage banks to lend and business and consumers to borrow to jumpstart the stagnant economy?

Unfortunately, one immediate reaction to the FOMC strategy was a significant drop in stock prices over the next two days.  The "market" may have interpreted the Fed policy as a sign of even worse economic conditions than generally understood.  The popular thought seems to be that the Fed is "twisting" the system in a way that may or may not result in the intended stimulus.  Some see it as a necessary action to stimulate.  Some see it as risky meddling in financial markets with uncertain results.  Take a close look at the monetary policy announcement from the September 20-21, 2011, FOMC meeting and keep an eye on the economy in October and November to see who is right.

U.S. Monetary Policy and the FOMC

The purpose of the Federal Reserve System's Federal Open Market Committee (FOMC) is to undertake monetary policy actions to "influence the availability and cost of money and credit to help promote national economic goals."  The FOMC meets approximately every six weeks to review and recommend monetary policy goals and actions.

The nation's overall economic goals, as established by the "Employment Act of 1946," are to "promote maximum employment, production, and purchasing power."  Monetary policies are intended to achieve these goals.  The Federal Reserve Act of 1913 had previously given the Federal Reserve responsibility for establishing monetary policy.

[Teacher Note: For a summary of the Employment Act of 1946 and the Federal Reserve System's monetary policy mandate, see: http://www.frbsf.org/econrsrch/wklyltr/wklyltr99/el99-04.html.]

The FOMC's monetary policy actions along with various macroeconomic measurements can give us a "picture" of the health and future prospects for the U.S. and global economies. 

[Teacher Note: Additional EconEdLink lessons are published monthly during the school year on U.S. real GDP growth, the consumer price index, and employment/unemployment data.  www.econedlink.org.] 

Take a look at the FOMC's September 21, 2011, monetary policy announcement for a better understanding of the current health and future prospects for the U.S. economy

Federal Open Market Committee Monetary Policy Press Release

Released: September 21, 2011

"Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable."

Economic growth is slow, labor markets are weak, and unemployment is still too high. Spending and investment are not recovering fast enough. The FOMC had few positive things to say about the health of the U.S. economy and took stronger actions intended to turn things around and will look for signs of risks, global economic threats and inflation in order to achieve its mandates.

[Discussion Question: Have students noticed signs of a slow economy in their community?  More unemployment, closed businesses, fewer government services, etc.?]

"Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations."

The FOMC took a seldom-used action, referred to by the media as "Operation Twist," to reduce long-term interest rates.  This action included purchasing up to $400 billion of long-term (6-30 years) Treasury Securities and selling a like amount of short-term (3 years or less) Treasury securities.

"To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate."

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

In a repeat of its previous monetary policy announcement in August (with just a few changed words), the FOMC its commitment to maintaining a very low federal funds rate target for some time.

"The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."

The FOMC statement concluded, as usual, that the committee is ready to respond quickly, should economic conditions change for the bad or the good.

"The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

A Brief Introduction to The Federal Reserve System, the FOMC, and Monetary Policy

The Federal Reserve System was created by Congress in 1913 "to provide the nation with a safer, more flexible, and more stable monetary and financial system." It is a federal system, composed of a central, governmental agency, the Board of Governors, in Washington, D.C., and twelve regional Federal Reserve Banks, located in major cities throughout the nation.

The Federal Reserve’s duties fall into four general areas:

  1. Conducting the nation’s monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
     
  2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers.  
     
  3. Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.
     
  4. Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system.

A Brief History of Central Banks

Most developed countries have a central bank whose functions are broadly similar to those of the Federal Reserve. The oldest, Sweden’s Riksbank, has existed since 1668 and the Bank of England since 1694. Napoleon I established the Banque de France in 1800, and the Bank of Canada began operations in 1935. The German Bundesbank was reestablished after World War II and is loosely modeled on the Federal Reserve. More recently, some functions of the Banque de France and the Bundesbank have been assumed by the European Central Bank, formed in 1998.

The Creation of the Federal Reserve System

During the nineteenth century and the beginning of the twentieth century, financial panics plagued the nation, leading to bank failures and business bankruptcies that severely disrupted the economy. The failure of the nation’s banking system to effectively provide funding to troubled depository institutions contributed significantly to the economy’s vulnerability to financial panics. After the crisis of 1907, Congress established a commission and institution that would help prevent and contain financial disruptions.

Congress passed the Federal Reserve Act in “to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of re-discounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.” President Woodrow Wilson signed the act into law on December 23, 1913.

The twelve regional Federal Reserve Banks and their Branches carry out a variety of System functions, including operating a nationwide payments system, distributing the nation’s currency and coin, supervising and regulating member banks and bank holding companies, and serving as banker for the U.S. Treasury. The twelve Reserve Banks are each responsible for a particular geographic area or district of the United States. Each Reserve District is identified by a number and a letter. Besides carrying out functions for the System as a whole, such as administering nationwide banking and credit policies, each Reserve Bank acts as a depository for the banks in its own District and fulfills other District responsibilities.

Federal Reserve Bank Districts
District
Number
District
Letter

Location

   1    A    Boston, Massachusetts
   2    B    New York, New York
   3    C    Philadelphia, Pennsylvania
   4    D    Cleveland, Ohio
   5    E    Richmond, Virginia
   6    F    Atlanta, Georgia
   7    G    Chicago, Illinois
   8    H    St. Louis, Missouri
   9    I    Minneapolis, Minnesota
   10    J    Kansas City, Missouri
   11    K    Dallas, Texas
   12    L    San Francisco, California


Students, click here for a map of the twelve Federal Reserve Districts.  Which bank serves your school's area.  The Twelve Federal Reserve Districts The Twelve Federal Reserve Districts

[Teacher Note:  Remind your students that the Federal Reserve Bank district boundaries were drawn in 1913, based on the levels of economic activity in those regions at that time.  Take a look at the map of the Federal Reserve Bank districts (http://www.federalreserve.gov/otherfrb.htm ) The western and southern districts are much larger, reflecting the distribution of economic activity at the time.  Would the district boundaries look the same if they were drawn in 2011?]

The Federal Reserve Board of Governors

The seven members of the Board of Governors are appointed by the President and confirmed by the Senate to serve 14-year terms of office. Members may serve only one full term, but a member who has been appointed to complete an unexpired term may be reappointed to a full term. The President designates, and the Senate confirms, two members of the Board to be Chairman and Vice Chairman of the Federal Reserve, for four-year terms.

The current chairman of the Federal Reserve is Ben S. Bernanke, Ph.D. Dr. Bernanke was sworn in on February 1, 2006, as Chairman and a member of the Board of Governors of the Federal Reserve System. Dr. Bernanke also serves as Chairman of the Federal Open Market Committee. He was appointed as a member of the Board to a full 14-year term, which expires January 31, 2020, and to a four-year term as Chairman.  He was reappointed for four years as chairman, as of February 1, 2010. Before his appointment as Chairman, Dr. Bernanke had been Chairman of the President's Council of Economic Advisers, from June 2005 to January 2006. 

[Teacher Note: Ben S. Benanke's bio on the Federal Reserve System website. http://www.federalreserve.gov/aboutthefed/bios/board/bernanke.htm ]

Chairman Bernanke seemed to summarize his position and responsibilities in a speech to the Economic Club of Minnesota in Minneapolis on September 8, 2011: "Economic policymakers face a range of difficult decisions, and every household and business must cope with the stresses and uncertainties that our current situation presents. These are not easy tasks. I have no doubt, however, that those challenges can be met, and that the fundamental strengths of our economy will ultimately reassert themselves. The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in a context of price stability."

The Federal Open Market Committee (FOMC)

An important component of the Federal Reserve System is the Federal Open Market Committee (FOMC), which is made up of the members of the Board of Governors, the president of the Federal Reserve Bank of New York, and presidents of four other Federal Reserve Banks, who serve on a rotating basis. The FOMC oversees open market operations, which is the main tool used by the Federal Reserve to influence money market conditions and the growth of money and credit. Traditionally, the Chairman of the Board of Governors serves as the Chairman of the FOMC. 

Federal Reserve Policy Tools

The Federal Reserve implements monetary policy through its control over the federal funds rate, the rate at which depository institutions trade balances at the Federal Reserve. It exercises this control by influencing the demand for and supply of these balances through the following means:

  • Open market operations: the purchase or sale of securities, primarily U.S. Treasury securities, in the open market to influence the level of balances that depository institutions hold at the Federal Reserve Banks. Open market operations are used to meet the goal of the target federal funds rate. Open market operations are conducted by the Domestic Trading Desk at the Federal Reserve Bank of New York.  
  • Reserve requirements: requirements regarding the percentage of certain deposits that depository institutions must hold in reserve in the form of cash or in an account at a Federal Reserve Bank.  
  • Contractual clearing balances: an amount that a depository institution agrees to hold at its Federal Reserve Bank in addition to any required reserve balance.  
  • Discount window lending (discount rate): extensions of credit to depository institutions made through the primary, secondary, or seasonal lending programs.

 

[Teacher Note: For more information about FOMC policy tools, go to the Federal Reserves FOMC webpage. Click on "Policy Tools" on the left side of the page. http://www.federalreserve.gov/monetarypolicy/fomc.htm ]

By trading government securities, the New York Fed affects the federal funds rate, which is the interest rate at which depository institutions lend balances to each other overnight. The Federal Open Market Committee establishes the target rate for trading in the federal funds market. The target rate is currently set at a 0 to 1/4 percent range (since December, 2008.)

Figure 1 shows the recent history of the target federal funds rate through current period. Notice how the target rate has normally moved up and down in a cyclical pattern. This pattern of change is strongly correlated with the business cycles, generally increasing during expansionary periods and decreasing during contractions. The fed funds rate target has been set at 0 to 1/4 percent since December 2008.

figure 1

[Teacher Note: For detailed information about "Open Market Operations ."  For more information about the U.S. Federal Reserve System and the Board of Governors of the Federal Reserve System. For more information about the FOMC, go to "About the FOMC "]

How Monetary Policy Affects the Economy

The initial link in the chain between monetary policy and the economy is the market for balances held at the Federal Reserve Banks. Depository institutions have accounts at their Reserve Banks, and they actively trade balances held in these accounts in the federal funds market at an interest rate known as the federal funds rate. The Federal Reserve exercises considerable control over the federal funds rate through its influence over the supply of and demand for balances at the Reserve Banks.

The FOMC sets the federal funds rate at a level it believes will foster financial and monetary conditions consistent with achieving its monetary policy objectives, and it adjusts that target in line with evolving economic developments. A change in the federal funds rate, or even a change in expectations about the future level of the federal funds rate, can set off a chain of events that will affect other short-term interest rates, longer-term interest rates, the foreign exchange value of the dollar, and stock prices. In turn, changes in these variables will affect households’ and businesses’ spending decisions, thereby affecting growth in aggregate demand and the economy.

Short-term interest rates, such as those on Treasury bills and commercial paper, are affected not only by the current level of the federal funds rate but also by expectations about the overnight federal funds rate over the duration of the short-term contract. As a result, short-term interest rates could decline if the Federal Reserve surprised market participants with a reduction in the federal funds rate, or if unfolding events convinced participants that the Federal Reserve was going to be holding the federal funds rate lower than had been anticipated. Similarly, short-term interest rates would increase if the Federal Reserve surprised market participants by announcing an increase in the federal funds rate, or if some event prompted market participants to believe that the Federal Reserve was going to be holding the federal funds rate at higher levels than had been anticipated.

Business Cycles

The U.S. economy is slowly growing after the most serious economic downturn (recession) since the Great Depression of the 1930s.  Since the Great Depression, the U.S (as have other world economies) has experienced periods of growth and decline of economic activity called business cycles.  Most of the business cycles have not been serious recessions, like the period from December 2007 to June 2009.   Figure 2, below, shows the concept of the business cycle and the stages of decline, trough, growth and peak that define a cycle.

figure 2

For more information about the periods of recession in U.S. history, go to the National Bureau of Economic Research (NBER) website:  http://www.nber.org/cycles/cyclesmain.html

Expansionary monetary policy actions: Decrease interest rates

  • Reduce the target fed funds rate
  • Open market operations: buy securities
  • Reduce reserve requirements
  • Decrease the discount rate

Contractionary monetary policy actions: Increase interest rates

  • Increase the target fed funds rate
  • Open market operations: sell securities
  • Increase reserve requirements
  • Increase the discount rate
     

Changes in short-term interest rates will influence long-term interest rates, such as those on Treasury notes, corporate bonds, fixed-rate mortgages, and auto and other consumer loans. Long-term rates are affected not only by changes in current short-term rates but also by expectations about short-term rates over the rest of the life of the long-term contract. Generally, economic news or statements by officials will have a greater impact on short-term interest rates than on longer rates because they typically have a bearing on the course of the economy and monetary policy over a shorter period; however, the impact on long rates can also be considerable because the news has clear implications for the expected course of short-term rates over a longer time period.

In the current economic environment of slow growth, high unemployment, and slow credit markets, the Fed has adopted a stimulatory policy. Given the very low level of interest rates, over the last year, the Federal Reserve has taken additional measures to open up financial markets and stimulate spending. 

Thus, the FOMC restarted "Operation Twist."

[Teacher Note: For more information about the FOMC's "maturity extension program" - commonly referred to as Operation Twist, go to: http://www.federalreserve.gov/faqs/money_15070.htm .]

ASSESSMENT ACTIVITY

Essay Questions:


1. During a recessionary period, why would the Federal Reserve and FOMC choose to keep interest rates low?

[Lower interest rates are an incentive for consumers to purchase and for businesses to invest in new productive capacity.]

2. 
How do low interest rates help to achieve the Fed's goal to stimulate the economy and help banks?

[If banks have more excess reserves to lend, other market rates will fall. When credit markets are tight, either because funds are not available or lenders are reluctant to take risks, economic activity (output) slows, unemployment increases and people are uncertain about their economic futures. The Fed's stimulatory policies seek to encourage people to spend, businesses to invest and banks to make more loans.]

CONCLUSION

Once again, the Federal Open Market Committee concluded that although it sees some U.S. economic growth in the future, but the economy is slow to recover and needs further stimulus.  The federal funds rate target was kept at the historic low of zero to .25 percent.   "Operation Twist" was devised to lengthen the average maturity of the Fed's securities holdings and to lower long-term interest rates.

The Federal Reserve is charged with promoting employment growth and price stability.  Current policies - extremely low interest rates and purchasing hundreds of billions of dollars of government securities, have, so far, not resulted in the intended growth and employment.  More action seemed appropriate to the FOMC.

Global events and debt issues continue to negatively impact U.S. markets and the economy.  Given the interdependence of world economies, it may be difficult to solve domestic problems while global economic conditions are volatile.

Can monetary policy help to create the growth and jobs the U.S. economy needs?  It can facilitate growth by making it easier (cheaper) to borrow, consume, and invest.  It can be ready to act, should inflation happen.  But, it can't make people buy things and producers hire employees.  That will only happen when people have more faith in their future income and businesses have more faith in their future profits. 

EXTENSION ACTIVITY

Take a look at data about your school's regional Federal Reserve district bank. 12 regional Federal Reserve Banks serve the United States.

From the Map of the Twelve Federal Reserve System Districts , students should identify the Federal Reserve Bank that serves their school's geographic area.

Students can explore their Federal Reserve Bank's web site for information about the economic health of their region and programs available to area businesses and consumers. 

  • Are economic conditions in your region of the United States similar, better or worse than national economic conditions? Growth? Employment/unemployment? Price level changes?
  • Are there any particular characteristics about your region that impact it's economic health - better or worse than other regions?
  • What do the president and/or other leaders of your Federal Reserve Bank have say about current regional economic conditions?
  • What programs and information services does your Federal Reserve Bank offer to businesses, consumers or schools?

Take another look at the map of the regional Federal Reserve Banks.  Do the sizes and boundaries of the twelve regions make sense to you?  Remember, this map was drawn in 1913 when the population and level of economic activity of the western and southern regions was very much smaller. 

Do you think the map would look different if the regions were established and the map was drawn today?

[Note: Some Federal Reserve district banks have extensive educational resources and others do not.  Go to www.federalreserveeducation.org to access these publications.]