How do the actions of the Federal Reserve effect U.S. business decisions.

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readerofbooks | College Teacher | (Level 2) Educator Emeritus

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This is a great question. The federal reserve has two objectives. First, it is to keep the unemployment numbers low and to keep the US currency relatively strong. They have a few tricks up their shelves to do this. First, they can lower interest rates, which they have been doing for a long time. Second, they can print money, something that they have been doing as well.

Both of these actions have an enormous impact. In fact, there are too may to name. So, I will only give a few examples. First, if interest rates are low, then it allows business to borrow more money at a cheaper rate. This means that companies can expand, if they want. Second, if the Federal government prints more money, then banks can lend more money to kick start more businesses and allow existing companies to hire. It is sad to say that these things have not happened so far.

Finally, when the Federal Reserve prints more money, many companies buy commodities, because they believe that there will be massive inflation in time to come.

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