Q: I heard the Fed Chairman Ben Bernanke’s press conference last week. Does Fed policy directly affect me?
A: Yes indeed. The interest rates on a host of transactions like investing in CDs, taking out a mortgage, or obtaining a business loan depend directly upon policy decisions by the Fed. It is therefore important to understand the role the Federal Reserve System plays in stabilizing the U.S. economy.
Most countries have some form of central bank that exercises control over the supply of money and credit within their borders.
This sphere of influence is referred to as monetary policy, and is typically the explicit purview of the central bank (as opposed to fiscal or budgetary policy, which in the United States belongs to Congress).
It is imperative that the central bank maintain a high level of independence from the legislature to insulate decision making from political pressure. The U.S. central bank is comprised of 12 regional