The Federal Reserve is the steward of the U.S. economy, tasked with fulfilling its dual mandate of maximum employment and stable prices.
To achieve these goals, the Fed has twelve regional outposts scattered across the country to assess how different regions of the country are doing — and what policies would better their economic conditions.
[Read: What is the Federal Reserve?]
The Federal Reserve Bank of Minneapolis is the ninth of those twelve locations. Headquartered at the corner of North 1st Street and North 1st Avenue, the Minneapolis Fed keeps a pulse on much of the American North.
As part of Yahoo Finance’s Meet the Fed series, the Minneapolis Fed shares its approach to public outreach, the unique challenges facing its region, and the role of bank regulation and payments in supporting the economy.
About the ninth district
From the western border of Montana all the way to the eastern edge of Northern Michigan, the Minneapolis Fed’s jurisdiction covers over 400,000 square miles. The ninth district covers some 12% of the nation’s land, but only 3% of the nation’s population lives within these borders, the smallest share of any of the Federal Reserve system's 12 regional banks.
Given this people-to-land ratio, it comes as little surprise the Minneapolis Fed has a diverse agricultural sector. About 31% of the nation’s wheat and roughly 20% of the nation’s corn is produced in the district. The Upper Great Lakes accounts for over 90% of the nation’s iron ore.
Minneapolis Fed President Neel Kashkari says the manufacturing, energy, health care, and technology sectors also make up the productive fabric of the region.
“In many ways, the ninth district looks like the U.S.,” said Kashkari, who began serving as the reserve bank’s top official in 2016.
Kashkari flagged two unique economic factors that matter to his district: climate change and economic inequality. He noted that while global warming may have costs to other regions of the country, warmer weather could benefit Minnesota — known for its frigid and long winters.
Racial disparities have been a key focus of the Minneapolis Fed following the 2020 murder of George Floyd by a Minneapolis police officer. The reserve bank would later start a national conversation over how racism plays into unequal economic opportunities.
“There's an economy that is systematically leaving out lots of its citizens. That's not a fully functioning economy,” Kashkari said.
Communicating with the district
A critical function for any Federal Reserve Bank is engaging with households, businesses, and bankers to gauge the economic health of the region. The 12 districts then report back to the Board of Governors, both formally (through regular reports like the Beige Book) and informally (in policymaking meetings).
Local outreach forms the basis for each reserve bank president’s approach to policy, since the regional heads are part of the Federal Open Market Committee that sets benchmark interest rates.
When the Fed raises interest rates to slow an overheating economy or lowers interest rates (to boost a sluggish economy, these moves can dramatically impact economic conditions across each district.
The challenge: different corners of the district may be experiencing different economic conditions, meaning Fed presidents need to keep in touch with a diverse group of contacts from all over.
“We need to make sure we’re listening to all the voices in our region,” Kashkari said.
The Fed also has other functions beyond the interest rate announcements which garner the most media attention.
For example, the reserve banks have supervisory and regulatory responsibilities over the banks in their districts. Although most of the banks within the Minneapolis Fed’s boundaries are small community banks, large firms like U.S. Bank (USB) are also headquartered in the ninth district.
The reserve banks also serve as cash repositories for the region. During the pandemic, a demand for cash pushed the Minneapolis Fed’s cash operations into overtime.
“If you ever went to your bank and they said, ‘we don't have cash to give you,’ that could trigger a crisis of confidence, a true panic. We needed to make sure that that didn't happen,” Kashkari said.
Through the many reserve bank functions, the mission remains the same: supporting the smooth functioning of the financial system and the economy at large.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.