The Central Bank, defined as the treasury of a country, carries out the foremost duty of the state as a safe deposit box. It has many significant tasks including stabilizing prices, fighting the inflation of the government, regulating the sources of borrowing, paying debts, bridging banks, printing money, maintaining the value of its currency, managing foreign exchange and gold reserves and regulating the exchange rate regime. To carry out these tasks, the Central Banks use several instruments under their authority. They aim to control the movement of prices by reducing and increasing the money supply in the market and regulating interest rates. The structure, policies, and instruments of the Central Bank in the literature is a matter of science. The fact that the central banks are the indispensable observers of every economy and the intervention in free-market economies makes them the most powerful authority that has definite results. The most powerful central bank, concerning all markets in general, is the Federal Reserve System (FED), the Central Bank in the United States. Since 1971, the exchange rate of USD has been inevitable, and the movements related to the USD inevitably affect all the international markets and the world economy. The Federal Reserve System was reformed in 1907 as a result of the massive economic crisis that shook the US Banking System in 1907 and it was introduced in this reform.
The FED was founded by the American Congress to provide a safe, more stable, and financial system for the people in America. In this system, there are 12 Federal Reserve Banks each of which has a restricted working area. All national banks are affiliated to the Federal Reserve System, and all banks deposit some of their demand deposits to the Federal Reserve Bank in their regions.
FED takes decisions related to changes in interest rates at the FOMC – Federal Open Market Committee. The meetings are held on Monday and Tuesday (2 days) every 6 weeks. Fundamental Analysts follow the results of this meeting closely since the results of this meeting affect the USD and therefore many parities. Furthermore, the opinions of the FED may have a notable impact on the political developments in the current economic conditions. Thus, all the statements of the head of the Central Bank are carefully monitored. The opinion and power of the institution it represents have an effect that can influence the future of the markets. The head of the Central Bank can be observed to be moving in the markets without any more dialogue. Therefore, all economists carefully follow the FED’s evaluations and the president’s statements. Other than USD, another important currency is EUR. The ECB, the European Central Bank, is responsible for EUR. The ECB was established on June 1, 1998, with its headquarter in Frankfurt, Germany. The ECB is obliged to manage EUR which is the common currency in 17 countries in the European Union. The management structure and rules are independent in every country.
The ECB’s interest disclosures and the assessments of the EUR area are very important. Unlike the FED, the ECB publishes the interest rate decisions monthly, and it is carefully monitored by fundamental analyst followers.
Moreover, speculative statements are also followed by highly significant evaluations to rotate the direction of money under developing economic circumstances.