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How the Fed's Moves Affect You

1 0 14
05.09.2020

Illustration by Kotryna Zukauskaite

Not all that long ago, the only major decision the Federal Reserve Board had to make was where to set short-term interest rates. But in the past decade, the Fed has become increasingly aggressive in its efforts to pump up the economy—and there’s no sign it will slow down anytime soon. Whether you’re a borrower, saver or investor, this matters to you.

Some history: As the economy cratered in 2008, the Fed made the unprecedented move of purchasing large sums of Treasury bonds and mortgage-backed securities, which pumped an extra $1 trillion into the economy. Over the course of the next 10 years, it purchased an additional $2.5 trillion. Then, when the coronavirus crisis hit, the Fed purchased another $3 trillion in bonds and securities, bringing its liabilities so far to a record $7.2 trillion. (The total size of the U.S. economy is currently $21.5 trillion.)

And the Fed isn’t done. It now has the authority to support up to $2.6 trillion in new lending, which includes making loans to businesses through its Main Street Lending Facility and lending to city, county........

© Kiplinger


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