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Value Investing Archives -

11 Dec


You, Your Financial Well-Being and the Federal Reserve

December 11, 2015 | By |

Since December 2008, the U.S. Federal Reserve (the Fed) has held the federal funds rate at zero percent, seeking to bolster an ailing economy in the aftermath of the Great Recession. Economists agree that the position is unusual, and highly unlikely to go on forever – drastic times called for drastic measures. Then again, they’ve been agreeing on that for seven years. Each year, the Fed has had eight opportunities to ease into rate increases, and they haven’t yet.

Will rates move upward in December? Fed Chair Janet Yellen has been suggesting that the answer is at long last … probably. Let’s take a moment to put the unfolding news into context!

What Is the Federal Reserve?

As described on its consumer education site, the Federal Reserve is the central bank of the U.S. It was created by Congress as an independent government agency in 1913 to “provide the nation with a safer, more flexible, and more stable monetary and financial system.” Yellen is its board of governors’ chair. Ben Bernanke was chair before her, and Alan Greenspan before that.

Yellen and her board of governors are based in Washington, DC. They also oversee 12 regional reserve branches across the country and are tasked with three main roles:

  1. Monetary Policy – Promoting “maximum employment, stable prices and moderate long-term interest rates”
  2. Supervision and Regulation – Overseeing U.S. banks and gathering information to understand financial industry trends
  3. Financial Services – Serving as a bank for U.S. banks as well as for the country’s monetary operations – issuing currency, managing the government’s bank accounts, borrowing money in the form of