The Federal Reserve System  [hereinafter, “FED”] is the central bank of the United States. It was created in December 1913, with the enactment of the Federal Reserve Act, after a series of financial panics led to a desire for central control of the monetary system in order to supposedly alleviate financial crises. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest.  According to the Federal Reserve website, the five functions of the FED includes the following:

• Conducting  the nation’s monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
• Promoting  the stability of the financial system and minimizing systemic risks; 
• Promoting and monitoring the soundness of individual financial institutions;
• Provides safety and efficiency services to the banking industry and the U.S. government inorder to facilitate U.S.-dollar transactions and payments; and
• Monitoring emerging consumer issues and economic development activities, and administering consumer laws and regulations. 

In short, the FED is supposed to promote financial stability for the benefit of the United States. However, is this the reality of the most recent actions of the FED? 

Every year, Gallop conducts a survey of American adults on a variety of economic topics, including the Federal Reserve. According to its most recent poll in May 2023, only 36% of Americans have a “fair amount” of confidence that the FED will do the right thing for the US economy. This is the lowest number in over 20 years.  This is most likely due to the FED’s policy on raising interest rates at speeds of lightening since the Pandemic. This policy has created several adverse effects on the American economy including, but not limited to the following:

1. Negative impact on the Stock Market;
2. Increased burdens for those with variable-rate debts; and
3. Mortgages and home buying are becoming less affordable. 

In their final meeting of 2023, The FED chose to keep interest rates at their current borrowing rate of 5.25-5.5%.  It also indicated that there could be three rate cuts in 2024.  We are halfway through 2024, and there have been no rate cuts by the FED. Instead, in their most recent meeting at the beginning of May, 2024, the FED again chose to keep rates at the current level of 5.25-5.5%, a 23 year high.  FED Chairman Jerome Powell indicated that it will “take longer than expected” for FED officials to feel confident enough to cut rates. Perhaps actions like this also give the American people pause to trust whether they can believe what the FED is telling the public. 

Since the FED began to raise interest rates in 2022, in order to supposedly fight inflation, the following has occurred:

1. Interest rates remain high;
2. Savings accounts are dwindling;
3. Americans are racking up credit card debt; and
4. Inflation has remained high, taking a toll on people's budgets. 

Does it appear that these policies are really promoting the financial stability of the American people? I guess that is for you to decide. 

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