The Fed: Captain Of The Economic Ship If we liken the US economy to a ship making its way through the sometimes turbulent waters of economic cycles, then the ship's captain is the Federal Reserve System, usually referred to simply as "the Fed".				> Home > Glossary > Support
		The Federal Reserve System is the central bank of the United States and the guardian of the US economy's well being. Its job is to keep the economy on an even keel, with low unemployment, stable prices, and interest rates that are not too high and not too low. The Fed does this by conducting monetary policy: that is, influencing the amount of available money and credit in the US economy, through its control of bank reserves. (The Fed is where banks do their banking.)
		If the governors of the Fed think inflation threatens to knock the economy off course, they might raise the interest rate they charge banks (the Fed Funds rate). Banks, in turn, will raise their interest rates making it harder for people to borrow money, but more lucrative for them to save. This would help slow the economy. If the Fed thinks interest rates are too high and are leading to economic slowdown, the Fed might lower its rate in an attempt to stimulate the economy.

		Previous		Next

	© 2025 Morningstar Investment Management LLC