What are the main differences between the Fed and the Bank of England?

The key difference between the two central banks is over their remits, or marching orders, from government. While Britain's MPC has just one chief goal, to meet the 2 per cent inflation target set each year by the Chancellor, the Fed's much broader brief, set in law by the US Congress, is to maintain stable prices while seeking to foster growth and maximise American employment. This is known as the Fed's "dual mandate".

The Fed also places more emphasis that the Bank of England on so-called “core inflation”, measured after stripping out volatile food and energy costs.

Have these differences changed recently?

Yes. The Fed has edged tentatively towards declaring a specific target level for inflation like the MPC’s, but not explicitly. Instead the Fed announced in November that it will release forecasts for its favoured measure of inflation three years ahead _ since this is the time scale over which the Fed can be reasonably sure of determining inflation levels, this means its forecast figure effectively amounts to a target.

How are Fed decisions taken?

The Fed's key interest-rate setting body is the Federal Open Market Committee (FOMC) headed by Ben Bernanke, the Fed Chairman. There are 11 other FOMC members, six of whom, including Mr Bernanke, are Governors of the Fed's board, appointed by the President. The remaining five members are drawn on a rotating basis from the presidents of the 12 regional Federal Reserve Banks across the United States.

While the MPC meets monthly, the FOMC meets eight times a year. Its next rate-setting meeting is held tomorrow and Wednesday. Decisions of both the MPC and FOMC are taken by majority vote. However, the process at the Fed is generally more consensual than at the Bank, with less emphasis on the individual responsibility of voting members.

* Are there differences in the way in which decisions are announced?

Unlike the MPC, the FOMC's decisions are always accompanied by a statement.

The wording of this is a key way in which the Fed shapes financial market views of the economy, and of its likely next moves.

* What rates does the Fed set?

Explore Economics

• Autumn Budget 2007

• Budget 2008

• World Economic Forum

• The Times MPC

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