<P> For example, demand deposits are technically promises to pay on demand, while savings deposits are promises to pay subject to some withdrawal restrictions, and Certificates of Deposit are promises to pay only at certain specified dates; each can be converted into money, but "narrow" forms of money can be converted more readily . The Federal Reserve directly controls only the most narrow form of money, physical cash outstanding along with the reserves of banks throughout the country (known as M0 or the monetary base); the Federal Reserve indirectly influences the supply of other types of money . </P> <P> Broad money includes money held in deposit balances in banks and other forms created in the financial system . Basic economics also teaches that the money supply shrinks when loans are repaid; however, the money supply will not necessarily decrease depending on the creation of new loans and other effects . Other than loans, investment activities of commercial banks and the Federal Reserve also increase and decrease the money supply . Discussion of "money" often confuses the different measures and may lead to misguided commentary on monetary policy and misunderstandings of policy discussions . </P> <P> Monetary policy in the US is determined and implemented by the US Federal Reserve System, commonly referred to as the Federal Reserve . Established in 1913 by the Federal Reserve Act to provide central banking functions, the Federal Reserve System is a quasi-public institution . Ostensibly, the Federal Reserve Banks are 12 private banking corporations; they are independent in their day - to - day operations, but legislatively accountable to Congress through the auspices of Federal Reserve Board of Governors . </P> <P> The Board of Governors is an independent governmental agency consisting of seven officials and their support staff of over 1800 employees headquartered in Washington, D.C. It is independent in the sense that the Board currently operates without official obligation to accept the requests or advice of any elected official with regard to actions on the money supply, and its methods of funding also preserve independence . The Governors are nominated by the President of the United States, and nominations must be confirmed by the U.S. Senate . </P>

What organization sets monetary policy for the united states