The Federal Reserve: Most Important Economic Policies In The World

The Federal Reserve (Fed) creates and manages some of the most important economic policies in the world. Its current chairman, Janet Yellen is considered one of the most powerful people in the world because of the decisions she oversees. One of the biggest decisions that Federal Reserve has to make is what to do with the short-term interest rate. To comprehend that question one must look at the two factors that go into that decision. Those two factors are referred to as the dual mandate. So what exactly does the dual mandate entail of?

The first goal of the Fed’s dual mandate is for the United States to have maximum employment and good economic growth. They just want to make sure the country stays out of a recession and the unemployment
One of those aspects is other economies in the world, particularly China. Recently China has seen some slowing in the growth of its economy. In the last couple years China has been the driving force behind the world economy so seeing its growth slow worries some economists. It is estimated that China’s economy is growing at 3 percent and it was projected to grow at 7 percent. (Washington Post) Whenever one large economy is doing poorly there is always a chance it could happen to another very soon. The Fed may fear that if they raise the rate the slowing down of the economy in China could hinder the growth of the United States economy just after it reached
Since the U.S. dollar is currently quite strong a spike in the interest rates would be negative for a couple of reasons. A reason being that inflation isn’t high, so a move that usually deters inflation could strengthen the dollar even further. Also because of other economies are struggling global economic activity is slowing and so will inflation. Now a strong dollar is good because that means that a consumer can buy more for the dollar in other countries. (Fortune) Now the real negative side of this comes in when thinking about people outside of America buying exports. Everything will cost more because of the increased worth of the dollar. So the export industry in the U.S. will make fewer sales, which means the middle-income jobs within that industry will have less job security. Even the slight possibility of people losing jobs is negative for an economy that is just getting their unemployment down. With the dollar in its current condition and the world economies the way they are dependent on it. (International Business Times) There are developing countries that are dependent on the state of the U.S. dollar and raising the interest rate has the possibility to change the dollar. As a right now raising the rate is not better for the U.S. dollar because of the fact that it affects others and the Federal Reserve has a global duty to help those