Small investors can not possibly have a significant impact on the movement of prices, as opposed to large players with multi-million dollar deposits are able to move it in the right direction. To the category of large players, first and foremost, the central banks. Not without the help of banks is a global movement of funds between financial institutions. It is worth knowing that the policies pursued by banks, rather strongly affects the market.
For example, the central bank has operations in the open market, as an active bidder, making intervention, refers to a change in the basic interest rate in order to implement its monetary policy by making changes reserve requirements. Lower the standards increases the emission rate of bank money, and increase - reducing the money supply.
1. Central banks
01.01 The U.S. Federal Reserve
V1913, U.S. President Woodrow Wilson introduced financial and economic practices such U.S. financial institution, as the Federal Reserve System (FederalReserveSystem, FED), which is the Central Bank of the United States, however, in contrast to other central banks, has its organizational features.
The Federal Reserve Bank has a total of 25 branches (in 2003) in the most important industrial and business centers of the United States. Each individual Federal Reserve Bank itself plays an important role in the implementation and realization of the particular monetary policy, despite the fact that the management of these processes as a whole belongs to the Council of Governors of the Federal Reserve. First, as a member of the Committee on Federal Open Market, five of the twelve Federal Reserve Bank President shall take an active part in the development and definition of the goals and objectives of monetary policy. The Board of Directors of the Federal Reserve Banks outlines and develops a certain time on a specific level of bank interest rates - one of the key parameters of the economic system, which is submitted for consideration and approval by the Board of Governors of the Federal Reserve.
The main purpose of the Federal Reserve Banks is not maximize profits, and the embodiment of the economic reality in the life of a certain U.S. monetary policy and management of multi-gogrannoy financial activities of the Federal Reserve System.
The Federal Open Market Committee (The Federal Open Market Committee, FOMC) - the most famous and very important committee. This committee is responsible for the conduct of monetary policy and the Federal Reserve open market operations, determining interest rates on loans in the banking system. Number of committee meetings per year must be at least 8, held on Tuesdays and Wednesdays.
The budget of the Federal Reserve, as an independent organization, making the Fed itself, but it is a supplement to the federal budget and to the information received by the U.S. Congress.
Over the years, the Fed keeps a small portion of the proceeds to increase equity.
Status of the remitted profits characterized by the following figures:
450 billion, USD - Fed's assets;
4 billion dollars. - Initial equity;
4 billion dollars. - To keep in additional equity capital for a number of years;
25 billion dollars. - Average annual income.
A national monetary policy - the most important function of the Federal Reserve. The essence of monetary policy - the impact on the price and availability of money. The price of money - is the value of interest rates on loans in the financial system. In another way, it is sometimes referred to as the regulation of money supply / demand. This is done to achieve the best price values credit in the current economic situation and create optimal conditions for economic development and employment of the working population also affects the price of credit and the general price level in the country.
In monetary policy, there are two aspects: long-term and short-term:
Long-term - is to achieve the maximum level of production and employment. All this against the background of price stability.
Short-term - this resolution of current issues that may arise in meeting these goals. In the short term, efforts to achieve price stability might, for example, be in conflict with the terms of maximum employment and maximum production. This may be due to the large or, conversely, small harvests, fluctuations in commodity prices, we buy in foreign markets (oil, for example), etc.
The Fed can affect the price and availability of credit as follows:
a) by establishing the level of required reserves for credit - institutions;
b) the conduct of open market operations and put a value on the interest rate (fundsrate);
c) determining the magnitude of the interest rate (discount rate).
Required reserves - is the amount of funds that banks must keep in special accounts at the Federal Reserve banks.
These decisions can lead to a change of the dollar relative to other world currencies. If the value of reserve decreases, the commercial banks to produce more free dollars. That, in turn, usually leads to an increase in supply of dollars in the world currency markets, and in line with classical economic theory of supply and demand, the dollar decreases.
This operation, carried out by the Fed of government securities issued by the U.S. Treasury. The purpose of this operation is to maintain the level of interest rates, the so-called fundsrate, change in the value of which is directly affected by the change of the dollar on world markets.
Changes in interest rates directly affect the cost of money. This value can be changed only at a meeting of the Federal Open Market Committee. Typically, the decision to change the value fundsrate directly involves a change of the dollar on the world market (Increasing the rate leads to an increase in the dollar, and vice versa). These meetings are held in Washington on Tuesday and Wednesday, and the decision to change the rates published at 01:15 on Tomsk time.
1.2. The European System of Central Banks
The European System of Central Banks, the ESCB - an international banking system, consisting of a supranational European Central Bank (ECB) and the national central banks (NCBs) of states - members of the European Union (EU) and the European Monetary Union (EMU, the euro area). The existence of this system is an integral part of the approval process of European economic and monetary structures.
The main purpose of the European system of central banks is to maintain the stability of the euro and prices in the euro area. The concept of "price stability" is quantified. ECB Governing Council periodically sets inflation targets, which should be maintained.
To achieve the main objective of the ESCB allows the following specific objectives:
• Definition and implementation of the single monetary policy. Governing Council of the ECB determines the single monetary policy that national central banks to implement decentralized and harmonious way.
• Storage and management of official foreign exchange reserves of member countries, and currency transactions.
The European System of Central Banks shall store and manage the official foreign reserves of the participating countries EMU.
According to the charter the ECB, the national central banks should give him (on credit) foreign exchange reserves totaling the equivalent of 50 billion euros.
It is considered necessary to provide a coherent monetary and monetary policy in the EMU. Foreign exchange reserves can be used by the European Central Bank for foreign exchange intervention, and he is entitled to make decisions on such in-terventsy. This, however, does not mean that the ECB intends to establish any guidance as to the course of any foreign currency, since this may result in a contradiction with the priority of price stability. However, the European System of Central Banks has a technical capacity to intervene in currency markets to counter excessive or erratic fluctuations of the euro against major currencies of countries outside the European Community. In late 2003 - early 2004 (a period of strong growth in the euro), the ECB actively employed threats of intervention and intervention to stop the growth of the European currency.
• Ensuring the proper functioning of payment and settlement systems.
To ensure the success of a new currency in the third stage of EMU is important to have an effective base of payments and settlements. In particular, this framework is useful for promoting a common short-term interbank interest rates across the euro area. This implies, in turn, create a system, through which the main large-scale cross-border transactions can be serviced within the same day. Such a system was set up and given the name TARGET.
TARGET - a system for interbank payments for the euro, which operates in real time.
The European Central Bank in Frankfurt am Main, Germany. The youngest of the Central Bank of the world - it started functioning from June 1, 1998 Despite his youth, the bank caters to the interests of the world's second largest economy - the economy of the European Union.
ECB is something like a public company. Own capital of the ECB to the top of its activities is set at 5 billion ECU (ie 5 billion euros - from 1 January 1999), later by management it can grow.
The main functions of the ECB:
• adapting instruction and decision-making to ensure the achievement of the goals of the European System of Central Banks;
• Identify key elements of monetary policy, such as interest rates, the amount of minimum reserves by national central banks, the development of specific instructions on how to carry it out.
ECB Governing Council is authorized to develop monetary policy, and the Board - put it into practice. To the extent that this is possible and appropriate, the European Central Bank has recourse to the possibility of national central banks.
As part of the task of choosing and implementing a single credit - monetary policy of the ECB should monitor the situation in the money markets and in case of need to influence them in order to avoid abrupt changes in the conditions of access to credit. As in the case of the Fed, the ECB uses the concept of an open market, that is, a framework in which commercial and national banks may provide loans to each other. The price and terms of the loan within this framework, and policy and actions of the central bank.
On the open market the ECB uses four primary mechanism for issuing and obtaining loans. It should be noted that in this case, it initiates a transaction, if it deems it necessary. Using these mechanisms, the central bank influences the level of liquidity and price of the loan:
1. Main refinancing operations. Routine operation of lending to commercial banks for a period of two weeks, weekly.
Changing the name of this rate leads to fluctuations in exchange rates. In the spring of 2004 the refinancing rate was 2%.
2. Long-term refinancing operations. On a monthly basis, the loans are granted for a period of three months, on the basis of collateral. In this case, the ECB rarely intervenes in the situation, not to give the market signals a possible change in interest rates in the future, and the cost of credit as part of the mechanism may be different from the rate in the case of the main refinancing operations.
3. Smoothing operation. Operation of adding to the financial system, removed her money. Pro-are found in the event of unforeseen fluctuations in the level of liquidity. For more operational impact on the market may be performed by the ECB. To carry out, all available to the national central banks of the mechanisms, not just the mortgage.
4. Structural operations. Carried out in case you need to change the structure of the financial position of the Central Bank against the rest of the financial sector. This may be used as a credit transaction on the basis of tenders and transactional deals on a bilateral basis. Virtually no effect on the currency market.
1.3. Bank of England
Bank of England (in narrow banking circles is known by the nickname "The Old Lady") was established in 1694 by William Paterson Someone suggested the government, much in need of money to release a loan for 1.2 million pounds, of which subscribers would be the shareholders of the banking company Bank of England .
In 1997, the UK Government is fully entrusted to it (together with the Ministry of Finance) responsible for setting interest rates, and their compliance with the inflation targets of government.
The Board of Directors shall meet at least once a month, and its competence for all matters of bank management, besides the issues of monetary policy, which the Special Committee on Monetary Policy (The Monetary Policy Committee, MPC).
The Bank has the following operating divisions:
1. Analysis and Statistics - conducts research and analysis of the current economic and financial situation, the research prospects of the global and domestic economies.
2. Transactions in the financial market - deals in the major financial markets, including FX, maintains the level of interest rates, as the agent of the Ministry of Finance manages the foreign reserves.
Officially designated goals and objectives of the Bank of England:
1. Maintaining the stability of the purchasing power and the national currency. In general, this objective is provided for its policies in interest rates, that is, by adjusting the "price of money" (credit-dit) and implies the maintenance of price stability.
2. Maintaining the stability of the financial system, both domestic and international. The bank act as the monitoring processes in the domestic and global financial systems, to understand the perspectives of their development.
3. Ensuring the effectiveness of the UK financial sector.
MPC (Monetary Policy Committee) - Committee on monetary policy, the most important committee for the impact of its decisions on the economy. He is responsible for setting interest rates. The committee on monetary policy is largely subject to the challenge of ensuring exchange rate stability and purchasing power of the currency. Policy Committee's interest rate to maintain price stability and to promote the successful implementation of the Government's economic policy, including its objectives for growth, jobs and keeping inflation at a set value.
In the case where this is required by the best interests of the state, the government may, in consultation with Parliament, to intervene in the affairs of the committee and to set interest rates. The Committee meets monthly, usually on the first Thursday of the month. The decision on interest rates is always declared immediately, on the first working Monday, following the first working Tuesday 18:00 Tomsk time.
Financial Stability Committee - Committee on Financial Stability. The committee contributes to the solution of the second main objective of the Bank of England - to the stability of the national and international financial systems.
Maintaining stability and the necessary value of the currency is one of the major challenges, since its successful solution automatically leads to price stability and the development of an enabling environment for non-inflationary economic growth. Solved mainly through certain monetary policy, which means that the change in interest rates in either direction depending on the current situation.
For example, the central bank has operations in the open market, as an active bidder, making intervention, refers to a change in the basic interest rate in order to implement its monetary policy by making changes reserve requirements. Lower the standards increases the emission rate of bank money, and increase - reducing the money supply.
1. Central banks
01.01 The U.S. Federal Reserve
V1913, U.S. President Woodrow Wilson introduced financial and economic practices such U.S. financial institution, as the Federal Reserve System (FederalReserveSystem, FED), which is the Central Bank of the United States, however, in contrast to other central banks, has its organizational features.
The Federal Reserve Bank has a total of 25 branches (in 2003) in the most important industrial and business centers of the United States. Each individual Federal Reserve Bank itself plays an important role in the implementation and realization of the particular monetary policy, despite the fact that the management of these processes as a whole belongs to the Council of Governors of the Federal Reserve. First, as a member of the Committee on Federal Open Market, five of the twelve Federal Reserve Bank President shall take an active part in the development and definition of the goals and objectives of monetary policy. The Board of Directors of the Federal Reserve Banks outlines and develops a certain time on a specific level of bank interest rates - one of the key parameters of the economic system, which is submitted for consideration and approval by the Board of Governors of the Federal Reserve.
The main purpose of the Federal Reserve Banks is not maximize profits, and the embodiment of the economic reality in the life of a certain U.S. monetary policy and management of multi-gogrannoy financial activities of the Federal Reserve System.
The Federal Open Market Committee (The Federal Open Market Committee, FOMC) - the most famous and very important committee. This committee is responsible for the conduct of monetary policy and the Federal Reserve open market operations, determining interest rates on loans in the banking system. Number of committee meetings per year must be at least 8, held on Tuesdays and Wednesdays.
The budget of the Federal Reserve, as an independent organization, making the Fed itself, but it is a supplement to the federal budget and to the information received by the U.S. Congress.
Over the years, the Fed keeps a small portion of the proceeds to increase equity.
Status of the remitted profits characterized by the following figures:
450 billion, USD - Fed's assets;
4 billion dollars. - Initial equity;
4 billion dollars. - To keep in additional equity capital for a number of years;
25 billion dollars. - Average annual income.
A national monetary policy - the most important function of the Federal Reserve. The essence of monetary policy - the impact on the price and availability of money. The price of money - is the value of interest rates on loans in the financial system. In another way, it is sometimes referred to as the regulation of money supply / demand. This is done to achieve the best price values credit in the current economic situation and create optimal conditions for economic development and employment of the working population also affects the price of credit and the general price level in the country.
In monetary policy, there are two aspects: long-term and short-term:
Long-term - is to achieve the maximum level of production and employment. All this against the background of price stability.
Short-term - this resolution of current issues that may arise in meeting these goals. In the short term, efforts to achieve price stability might, for example, be in conflict with the terms of maximum employment and maximum production. This may be due to the large or, conversely, small harvests, fluctuations in commodity prices, we buy in foreign markets (oil, for example), etc.
The Fed can affect the price and availability of credit as follows:
a) by establishing the level of required reserves for credit - institutions;
b) the conduct of open market operations and put a value on the interest rate (fundsrate);
c) determining the magnitude of the interest rate (discount rate).
Required reserves - is the amount of funds that banks must keep in special accounts at the Federal Reserve banks.
These decisions can lead to a change of the dollar relative to other world currencies. If the value of reserve decreases, the commercial banks to produce more free dollars. That, in turn, usually leads to an increase in supply of dollars in the world currency markets, and in line with classical economic theory of supply and demand, the dollar decreases.
This operation, carried out by the Fed of government securities issued by the U.S. Treasury. The purpose of this operation is to maintain the level of interest rates, the so-called fundsrate, change in the value of which is directly affected by the change of the dollar on world markets.
Changes in interest rates directly affect the cost of money. This value can be changed only at a meeting of the Federal Open Market Committee. Typically, the decision to change the value fundsrate directly involves a change of the dollar on the world market (Increasing the rate leads to an increase in the dollar, and vice versa). These meetings are held in Washington on Tuesday and Wednesday, and the decision to change the rates published at 01:15 on Tomsk time.
1.2. The European System of Central Banks
The European System of Central Banks, the ESCB - an international banking system, consisting of a supranational European Central Bank (ECB) and the national central banks (NCBs) of states - members of the European Union (EU) and the European Monetary Union (EMU, the euro area). The existence of this system is an integral part of the approval process of European economic and monetary structures.
The main purpose of the European system of central banks is to maintain the stability of the euro and prices in the euro area. The concept of "price stability" is quantified. ECB Governing Council periodically sets inflation targets, which should be maintained.
To achieve the main objective of the ESCB allows the following specific objectives:
• Definition and implementation of the single monetary policy. Governing Council of the ECB determines the single monetary policy that national central banks to implement decentralized and harmonious way.
• Storage and management of official foreign exchange reserves of member countries, and currency transactions.
The European System of Central Banks shall store and manage the official foreign reserves of the participating countries EMU.
According to the charter the ECB, the national central banks should give him (on credit) foreign exchange reserves totaling the equivalent of 50 billion euros.
It is considered necessary to provide a coherent monetary and monetary policy in the EMU. Foreign exchange reserves can be used by the European Central Bank for foreign exchange intervention, and he is entitled to make decisions on such in-terventsy. This, however, does not mean that the ECB intends to establish any guidance as to the course of any foreign currency, since this may result in a contradiction with the priority of price stability. However, the European System of Central Banks has a technical capacity to intervene in currency markets to counter excessive or erratic fluctuations of the euro against major currencies of countries outside the European Community. In late 2003 - early 2004 (a period of strong growth in the euro), the ECB actively employed threats of intervention and intervention to stop the growth of the European currency.
• Ensuring the proper functioning of payment and settlement systems.
To ensure the success of a new currency in the third stage of EMU is important to have an effective base of payments and settlements. In particular, this framework is useful for promoting a common short-term interbank interest rates across the euro area. This implies, in turn, create a system, through which the main large-scale cross-border transactions can be serviced within the same day. Such a system was set up and given the name TARGET.
TARGET - a system for interbank payments for the euro, which operates in real time.
The European Central Bank in Frankfurt am Main, Germany. The youngest of the Central Bank of the world - it started functioning from June 1, 1998 Despite his youth, the bank caters to the interests of the world's second largest economy - the economy of the European Union.
ECB is something like a public company. Own capital of the ECB to the top of its activities is set at 5 billion ECU (ie 5 billion euros - from 1 January 1999), later by management it can grow.
The main functions of the ECB:
• adapting instruction and decision-making to ensure the achievement of the goals of the European System of Central Banks;
• Identify key elements of monetary policy, such as interest rates, the amount of minimum reserves by national central banks, the development of specific instructions on how to carry it out.
ECB Governing Council is authorized to develop monetary policy, and the Board - put it into practice. To the extent that this is possible and appropriate, the European Central Bank has recourse to the possibility of national central banks.
As part of the task of choosing and implementing a single credit - monetary policy of the ECB should monitor the situation in the money markets and in case of need to influence them in order to avoid abrupt changes in the conditions of access to credit. As in the case of the Fed, the ECB uses the concept of an open market, that is, a framework in which commercial and national banks may provide loans to each other. The price and terms of the loan within this framework, and policy and actions of the central bank.
On the open market the ECB uses four primary mechanism for issuing and obtaining loans. It should be noted that in this case, it initiates a transaction, if it deems it necessary. Using these mechanisms, the central bank influences the level of liquidity and price of the loan:
1. Main refinancing operations. Routine operation of lending to commercial banks for a period of two weeks, weekly.
Changing the name of this rate leads to fluctuations in exchange rates. In the spring of 2004 the refinancing rate was 2%.
2. Long-term refinancing operations. On a monthly basis, the loans are granted for a period of three months, on the basis of collateral. In this case, the ECB rarely intervenes in the situation, not to give the market signals a possible change in interest rates in the future, and the cost of credit as part of the mechanism may be different from the rate in the case of the main refinancing operations.
3. Smoothing operation. Operation of adding to the financial system, removed her money. Pro-are found in the event of unforeseen fluctuations in the level of liquidity. For more operational impact on the market may be performed by the ECB. To carry out, all available to the national central banks of the mechanisms, not just the mortgage.
4. Structural operations. Carried out in case you need to change the structure of the financial position of the Central Bank against the rest of the financial sector. This may be used as a credit transaction on the basis of tenders and transactional deals on a bilateral basis. Virtually no effect on the currency market.
1.3. Bank of England
Bank of England (in narrow banking circles is known by the nickname "The Old Lady") was established in 1694 by William Paterson Someone suggested the government, much in need of money to release a loan for 1.2 million pounds, of which subscribers would be the shareholders of the banking company Bank of England .
In 1997, the UK Government is fully entrusted to it (together with the Ministry of Finance) responsible for setting interest rates, and their compliance with the inflation targets of government.
The Board of Directors shall meet at least once a month, and its competence for all matters of bank management, besides the issues of monetary policy, which the Special Committee on Monetary Policy (The Monetary Policy Committee, MPC).
The Bank has the following operating divisions:
1. Analysis and Statistics - conducts research and analysis of the current economic and financial situation, the research prospects of the global and domestic economies.
2. Transactions in the financial market - deals in the major financial markets, including FX, maintains the level of interest rates, as the agent of the Ministry of Finance manages the foreign reserves.
Officially designated goals and objectives of the Bank of England:
1. Maintaining the stability of the purchasing power and the national currency. In general, this objective is provided for its policies in interest rates, that is, by adjusting the "price of money" (credit-dit) and implies the maintenance of price stability.
2. Maintaining the stability of the financial system, both domestic and international. The bank act as the monitoring processes in the domestic and global financial systems, to understand the perspectives of their development.
3. Ensuring the effectiveness of the UK financial sector.
MPC (Monetary Policy Committee) - Committee on monetary policy, the most important committee for the impact of its decisions on the economy. He is responsible for setting interest rates. The committee on monetary policy is largely subject to the challenge of ensuring exchange rate stability and purchasing power of the currency. Policy Committee's interest rate to maintain price stability and to promote the successful implementation of the Government's economic policy, including its objectives for growth, jobs and keeping inflation at a set value.
In the case where this is required by the best interests of the state, the government may, in consultation with Parliament, to intervene in the affairs of the committee and to set interest rates. The Committee meets monthly, usually on the first Thursday of the month. The decision on interest rates is always declared immediately, on the first working Monday, following the first working Tuesday 18:00 Tomsk time.
Financial Stability Committee - Committee on Financial Stability. The committee contributes to the solution of the second main objective of the Bank of England - to the stability of the national and international financial systems.
Maintaining stability and the necessary value of the currency is one of the major challenges, since its successful solution automatically leads to price stability and the development of an enabling environment for non-inflationary economic growth. Solved mainly through certain monetary policy, which means that the change in interest rates in either direction depending on the current situation.
