Fed Policy 101

The purpose of the Federal Reserve Board (Fed) is to use policies to guide the US economy. This is goal is achieved via two mandates: 1) price stability and 2) maximum employment.

As the US faces some of the highest inflation in decades, the Fed’s role to help temper prices and ensure the health of the economy is of extreme importance.

Presently, the Fed is raising interest rates to slow consumer demand for goods, services, and homes that is contributing to rising inflation. However, the Fed’s actions to raise its primary interest rate close to 4 percent may simultaneously cause a recession in the US later this year or early next year.

Understand what the Fed – the US central bank – is, the tools it uses to control inflation and promote jobs growth, and what it considers as it sets policy for the US Economy. Explore our guides for more:

• Executive's Guide to Fed Policy and Associated Risks: Part 1
• Executive's Guide to Fed Policy and Associated Risks: Part 2
• How Does the Fed work?

Sources: Federal Reserve Board and The Conference Board