My main aim to write this article was to help in explaining the fundamental workings of an institution, as crucial as the Fed, whose decisions impact our daily lives to the very core. With all its arsenal, the Fed was able to combat the aftermath of the financial crisis of 2008. Great efficiency and proper decision making resulted in the lowering of the unemployment rate, which is at a low of around 3.6%. Meanwhile, the inflation rate is stable at around 1.8%. The Fed has more power and influence on financial markets than any other legislative entity. Today, the Fed’s prime objective should always be to act ethically and try to steer the economy in the right direction. It should also try to reduce income inequality among the masses. Below are the graphs associated with the inflation rate and the unemployment rate, years from the end of the Recession.
Figure 4: Fed Mandate for Price Stability
Figure 5: Fed Mandate for Maximum Employment
