Federal Reserve System Open Market Account
Encyclopedia
The Federal Reserve System Open Market Account(SOMA) is one of monetary policy
tool used by Federal Reserve System
. It consists of the Federal Reserve's domestic and foreign portfolios. The SOMA domestic portfolio consists of U.S. Treasury securities held on both an outright and a temporary basis. The SOMA foreign currency portfolio consists of investments denominated in euros and yen.
The Federal Open Market Committee (FOMC) has designated the Federal Reserve Bank of New York to execute open market transactions on behalf of the entire Federal Reserve System. The resulting investments are held in the SOMA portfolio. Interest on the portfolio provides virtually all of the Fed's income; nevertheless, the central bank buys and sells securities purely to implement monetary policy and not for profit.
In addition, while the Treasury, in consultation with the Federal Reserve System, has responsibility for setting U.S. exchange rate policy, the New York Fed is responsible for executing foreign exchange intervention. The U.S. monetary authorities—the Treasury and the Fed—may intervene in the foreign exchange market to counter disorderly market conditions, using funds that belong to the Federal Reserve and to the Exchange Stabilization Fund
(ESF) of the Treasury Department.
http://www.newyorkfed.org/aboutthefed/fedpoint/fed27.html
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
tool used by Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
. It consists of the Federal Reserve's domestic and foreign portfolios. The SOMA domestic portfolio consists of U.S. Treasury securities held on both an outright and a temporary basis. The SOMA foreign currency portfolio consists of investments denominated in euros and yen.
The Federal Open Market Committee (FOMC) has designated the Federal Reserve Bank of New York to execute open market transactions on behalf of the entire Federal Reserve System. The resulting investments are held in the SOMA portfolio. Interest on the portfolio provides virtually all of the Fed's income; nevertheless, the central bank buys and sells securities purely to implement monetary policy and not for profit.
In addition, while the Treasury, in consultation with the Federal Reserve System, has responsibility for setting U.S. exchange rate policy, the New York Fed is responsible for executing foreign exchange intervention. The U.S. monetary authorities—the Treasury and the Fed—may intervene in the foreign exchange market to counter disorderly market conditions, using funds that belong to the Federal Reserve and to the Exchange Stabilization Fund
Exchange Stabilization Fund
The Exchange Stabilization Fund is an emergency reserve fund of the United States Treasury Department, normally used for foreign exchange intervention...
(ESF) of the Treasury Department.
http://www.newyorkfed.org/aboutthefed/fedpoint/fed27.html