The Federal Reserve System Open Market Account (SOMA) is one of the monetary policy tools used by the Federal Reserve System. It consists of the Federal Reserve's domestic and foreign portfolios. The SOMA domestic portfolio consists of U.S. Treasury securities held on both an outright and a temporary basis. The SOMA foreign currency portfolio consists of investments denominated in euros and yen.
The Federal Open Market Committee (FOMC) has designated the Federal Reserve Bank of New York to execute open market transactions on behalf of the entire Federal Reserve System. The resulting investments are held in the SOMA portfolio. Interest on the portfolio provides virtually all of the Fed's income; nevertheless, the central bank buys and sells securities purely to implement monetary policy and not for profit.
In addition, while the Treasury, in consultation with the Federal Reserve System, has responsibility for setting U.S. exchange rate policy, the New York Fed is responsible for executing foreign exchange intervention. The U.S. monetary authorities—the Treasury and the Fed—may intervene in the foreign exchange market to counter disorderly market conditions, using funds that belong to the Federal Reserve and to the Exchange Stabilization Fund (ESF) of the Treasury Department.
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