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

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The actions of the Federal Reserve have a significant impact on the overall health of the economy.  Because of this, US businesses will look at the actions of the Federal Reserve and try to predict how those actions will affect the decisions they need to make.

For example, if statements from the Federal Reserve indicate that the Fed may raise interest rates in the near future, businesses might act to borrow money in the short term so that they can benefit from the lower rates.  Conversely, a pending increase in interest rates might convince some businesses that the money supply will contract, leading to less consumer spending.  This might cause them to put off expansion or hiring.  Either way, businesses have to be aware of the impact that Fed actions can have on the economy and try to make decisions accordingly.

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

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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