The United States (US) Federal Reserve is made up of a Board of Governors, appointed to fourteen year terms by the President of the United States and confirmed by the Senate. They may serve only one term. The Federal Reserve controls monetary policy by moving the federal funds rate using open market operations. Open market operations involve using currency to buy and sell financial assets, typically gold, foreign currency or government bonds, thereby affecting the liquidity of the national currency. The federal funds rate, also called the overnight rate, is the rate which banks charge each other. It is about three points lower than the prime rate, which is the rate that banks charge their best customers. Periodically the Chairman of the Federal Reserve, currently Alan Greenspan, is required to report to Congress concerning US monetary policy.

             In his most recent report to Congress on February 16, 2005, Alan Greenspan, characterized the US economy as steadily improving. Acknowledging that economic activity had increased in 2003, he said that the expansion appeared tentative as 2004 began, due primarily to reluctance by businesses to hire new employees. During the spring of 2004, however, the economy strengthened as businesses began adding to their payrolls, increased investment in equipment and software and increased inventory levels. The construction sector continued to be strong, but consumer spending was soft. Consumer price inflation increased primarily due to a rise in oil prices.1 .

             In the second half of 2004, the economy continued to expand, although at mid-year there were signs of weakness, brought about as a result of high oil prices. By autumn this small slowdown was over, as consumer spending was up and businesses were again hiring and factory output increased. Business profits were healthy and capital spending increased throughout the remainder of 2004. According to Greenspan, "The fundamental factors underlying the continued strength of the economy last year should carry forward into 2005 and 2006, promoting both healthy expansion of activity and low inflation.