Definition of Federal Reserve:

Federal Reserve:

The Federal Reserve or “The Fed” is the central banking system of the United States. It controls monetary policy through regulating banks, controlling inflation, maintaining money supply, and monitoring domestic and international financial markets. The Federal Reserve is a central driving force in the American Economy because it has a significant effect on changes in long and short term interest rates. If the economy is headed towards inflation, the FED will increase interest rates to increase the cost of borrowing money, which is meant to decrease borrowing and total debt. With the financial crisis of 2008, Wall Street blamed the Fed for not acting faster to increase interest rates to stop the loose lending practices that led to the collapse and subsequent restructuring of the secondary mortgage market.

 

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