The Federal Reserve, often called the Fed, is like the central bank for the United States. It was created in 1913 to help make sure the U.S. economy stays strong and stable. While you may not interact with the Federal Reserve directly, the work it does affects everyone - from the prices we pay for things to how much interest we earn in our savings accounts.
What Does the Federal Reserve Do?
Here are some of the main things the Federal Reserve is responsible for:
1. Controls the Money Supply
The Federal Reserve controls how much money is in the economy. They can increase or decrease the supply of money to help keep the economy balanced. For example, if inflation (when prices go up) is too high, the Fed might reduce the money supply to slow things down.
2. Sets Interest Rates
The Fed sets a key interest rate that influences the rates banks charge for loans, like when people borrow money to buy a house or car. When interest rates are low, borrowing money is cheaper, and that can encourage people and businesses to spend more. When interest rates are high, borrowing becomes more expensive, which can help slow down inflation.
3. Helps Keep Banks Safe
The Federal Reserve supervises and regulates banks to make sure they are operating safely and not taking too many risks. This protects your money in the bank and makes sure that the financial system stays strong.
4. Provides Financial Services
The Fed helps move money around the country by processing payments and transferring money between banks. It also helps make sure that paper money and coins are in good supply.
How Does the Federal Reserve Affect You?
Even though you do not interact directly with the Fed, what they do impacts your daily life. Here are a few examples:
- When the Fed raises or lowers interest rates, it can change how much you earn in a savings account or how much interest you might pay on a loan.
- The Fed helps keep prices stable, so you aren’t suddenly paying a lot more for things like groceries or gas.
- The Fed’s work with banks helps keep your money safe.
For more information about the Federal Reserve and what they do, visit www.federalreserve.gov.
Have questions or need assistance?
If you have questions about this topic or need assistance with your banking needs, please speak to one of our knowledgeable staff at your local Bar Harbor Bank & Trust branch. We’re here to help you build a solid financial future.
