I regularly write about the Fed, but I generally limit my focus to its policy decisions and their effect upon the broader markets.
The Fed, or more specifically, the Federal Open Market Committee (FOMC) meets every six weeks to discuss possible changes to monetary policies.
They base that decision on key data points – the same data points that I look at. The difference is that I’m watching for how the market reacts to the news.
But, of course, the Fed’s responsibilities extend far beyond dual mandate assigned by Congress.
The Federal Reserve System is the central bank of the United States. The system consists of 12 Federal Reserve Banks (Districts).
Congress overseas the Federal Reserve System but the Fed is an independent organization. This separation buffers the Fed against undue political influence. That means that the Fed’s decisions do not require approval by the Executive Branch.
The Fed performs five general tasks to promote the effective operation of the U.S. economy and, generally, the public interest.
I’m not even joking; that’s what they say!
Here’s the lowdown on the five tasks:
- Conducts the nation’s monetary policy to promote maximum employment, stable prices and moderate long-term interest rates in the U.S. economy.  Okay, Congress gave the Fed a dual mandate to promote max employment and stabilize prices. What that really did is give an organization power, beyond supposed influence, to do as they wish to manipulate the U.S. dollar. They do this by tinkering with interest rates, creating money out of thin air (bond purchases or QE) and telegraphing their actions into a public reaction.
- Promotes the stability of the financial system to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad.  I believe the Fed is most concerned with financial system stability. They saw the financial chaos in 2008. So when Fed officials talk about possible rate hikes, cuts or even stimulus action, their end goal is to promote stability or prop up the markets.
