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How does the Federal Reserve impact the economy?

Published: May. 4, 2021 at 7:42 AM EDT
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LEXINGTON, Ky. (WKYT) - The Federal Reserve, or the Fed, was credited by Warren Buffet for “resurrecting” the economy after March 2020. But do you know what exactly the Fed does? Independent financial planner Josh Smith of Strategic Wealth Designers joined the newscast to discuss what the purpose of the Federal Reserve is and what exactly it does for the economy.

“The Federal Reserve is the central bank of the United States,” Smith says. “The Fed supervises the nation’s largest banks and provides financial services to the country. It is comprised of the Board of Governors, 12 regional Federal Reserve Banks, and the Federal Open Market Committee. Members of the Fed are appointed by Congress.”

The Fed is responsible for managing inflation. They promote maximum employment and stable interest rates. They set the fed funds rate which guides interest rates. The 12 Federal Reserve banks supervise commercial banks. As demonstrated with the pandemic, the Fed helps maintain the stability of the economy. The Fed also provides banking services.

“Cryptocurrency is not insured in the same way a dollar is,” Smith says. “This means your money isn’t protected in the same way which makes cryptocurrency risky, as it is so speculative. The chair of the Federal Reserve, Jerome Powell, says the Fed is looking into if there is even a need for a central bank digital currency.”

The Fed directly impacts your life through stock and bond mutual funds and your loan rates. To see additional stories surrounding business and economic news for the Lexington area, visit https://www.WKYT.com/MoneyMatters/ and if you have a question for Josh send an email to info@swdgroup.com.

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