What exactly does Federal Reserve do?

A country’s economy can be compared to a chariot driven by two different horses - the government and the central bank. When it comes to the central bank, the growth versus inflation paradigm is one of the most difficult ones. While the economically right governments focus on the economy’s growth, the central bank needs to make sure that the interest rates are under control.

A central bank, in short, is a non-market-based or even anti-competitive institution. It is a financial institution that has control over the production and distribution of money and credit for a particular geography. The American central bank is known as the Federal Reserve, famously known as the Fed. It is arguably the most powerful financial institution in the country.


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