The Pros And Cons Of The Federal Reserve

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The Federal Reserve (Fed) creates and manages some of the most important economics policies in the world. Its current chairman, Janet Yellen is considered one of the most powerful people in the world because of the decisions she over sees. One of the biggest decisions that Federal Reserve has to make is what to do with the short-term interest rate. To comprehend that question one must look in to the two factors that go in that decision. Those to factors are referred to as the dual mandate. So what exactly does the dual mandate entail of?

The first goal of the Fed’s dual mandate is for the United States to have maximum employment and good economic growth. They just want to make sure the country stays out of a recession and the unemployment rate is kept low. The second goal is price stability or simply stopping inflation. Without keeping inflation stable the U.S dollar will lose it value in the world economy and cause all sorts of new problems for the country. (Federal Reserve Bank of Chicago) The Federal Reserve makes a lot of decisions based off of what the outcome …show more content…

Inflation is one of the main reasons for raising the interest rate, but currently inflation is not doing it usual numbers when it comes to a growing economy. It is expected for inflation to rise during this period but it is fact currently falling. So if inflation isn’t rising as expected that leads to the dollar being stronger than expect as well. Now a strong dollar is good and bad, it is bad because it will cause our exports to cost more for other countries. With a lot of other economies struggling recently the U.S. exports could take a hit because of lower conversion rates. Now if the Fed raises the interest rate to combat inflation the strength of the dollar may stay high, which in turn could hurt the export market of our

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