The Federal Reserve

Abstract

In this study, we will try to cover the concept of “US Federal Reserve” with interest rate perspective and its relation with “Financial Market”. The research also analyzes many aspects of “US Federal Reserve” and tries to gauge its effect on “Current Economic Activity”. Finally, the research describes various factors, which are responsible for “US Federal Reserve”, and tries to describe the overall effect of “US Federal Reserve” on “Financial Market”.

Federal Reserve

Introduction

The Federal Reserve System, which is to be also called as the Federal Reserves or in short “The Fed”, is regarded to be the Central Bank of the United States. It was establish by the Congress to provide the nation with flexible, safer, stable monetary and financial system. The Federal Reserve was established on December 23, 1913, in action of President Mr. Woodrow Wilson signature of the Federal Reserve Act into law. Today, Federal Reserves has some responsibilities, which are as follows:

Implement and use monetary policy effectively by influencing money and credit conditions for ensuring stable prices and hence full employment.

Regulating and supervising banks and other financial institutions for perfection, soundness and safety of the nation's banking and financial structure and to guard the credit rights of consumers.

Ensuring stability of the financial system and maintaining complete risk that may result in financial markets.

Plays a major role in overseeing and operating the nation's system of payments through providing assured financial services to the government of United States, financial institutions and foreign official institutions (Wessel, 2009).

Discussion

The Federal Reserve System, which is the Central Bank at United States, operates from the betterment of United States economy and they are ensuring effective functioning various financial institutions and banking system.

Role and Effectiveness of the Federal Reserves

Central Bank is considered to be the government's vital financial regulatory agency. The Federal Reserve is known for its efficient monetary policies and sustaining economic growth. The Federal Reserve has exercised varying degree of influence over economic growth and the employment level in recent era than any of the other government entity with its power to vary interest rates and going for purchase of huge amounts of financial assets. At the times when Wall Street meltdown occurred in way back 2008, from that times Fed used various traditional tools and various new ones too to support the financial system and provide a supporting hand to economy of United States at times of recession and weak recovery that occurred (Wells, 2004).

Economic Indicators

Economic Indicators, the Federal Reserves should consider for better analysing particular economy includes Durable good orders, Gross Domestic Product (GDP), Consumer Price Index, Unemployment rate, changes in employment payroll and U.S import price index.

Recently, looking at United States economy which is amongst biggest economy of the world is trapped with inflation, unemployment and huge trade deficit. So it should analyse effectively some economic indicators for positively stabilizing this particular economy which details are as follows:

Gross Domestic Product (GDP)

GDP is an efficient indicator for measuring value of goods and services that are produced within the borders ...