The Federal Reserve

The Federal Reserve

the role and the effectiveness of the Federal Reserve in stabilizing the current economy.

The Federal Reserve is the central bank of the United States, all of the monetary policies in the U.S. conducted by the Federal Reserve System are known as the FED. The Federal Reserve has many responsibilities dealing with the monetary policy of the United States and it is in charge of all the monetary supply and the policies that have to do with money. Federal Reserve makes different kind of choices; those choices have an effect on the employment level and the production of the economy.

American economy is based on financial balance of services, manufacturing, agricultural and banking industry.in the result U.S. considered one of the biggest global economy which comprises of foreign investments and movement of wealth in trade. For the past years the U.S. economy was able to focus more as a service based and industrial base economy than farming based. This result the banking system to be more complex to deal with the government and currency.

One of the roles of the Federal Reserve in stabilizing the current economy is to moderate long term rates, maximum employment and stabilize prices. Currently we still experience the economy suffering from the mortgage crisis, which leads to a high liquidity crisis, financial issues and the failures of financial institutions. Seeking to reduce this risk, the Federal Reserve had proposed many reforms of financial regulations. Some of these proposals, such as new government agency to monitor financial risk were enacted in 2010 (www.federalreserve.gov).

The federal reserve through its power to change interest rates and purchase amounts of financial assets, has exercised more influence over economic growth and the level of employment, it used all its traditional tools and many other new ones to increase the financial system after the Wall

Street meltdown of 2008 and gave the economy unprecedented forms of support during the recession and weak recovery. The Fed has engaged a big effort to stimulate the economic growth, the central banks has led a short term interest rate close to zero in December 2008 to further reduce long term rates; it has more than 2 trillion in government debt and mortgage securities. (nytimes.com, 2012).

In 2012 the Federal Reserve issued a statement regarding its longer run goals and monetary policy strategy, noted that the inflation at the rate of 2 percent is more consistent over the longer run with the Federal Reserve statutory mandate by keeping this inflation goal would help to keep longer term inflation expectations firmly. Thereby fostering the price stability and moderate long term interest rates with the purpose of promote maximum employment.

Determine which economic indicators the Federal Reserve should analyze so it can better

Stabilize this particular economy.

The economic indicators are very important for the wealth and grown of the economy. The Federal Reserve watched many of these indicators such as Gross Domestic Product (GDP), consumer price index (CPI), the producer price