Health & Fitness
What You Need to Know About The Federal Reserve Bank
The Federal Reserve Bank has been in the news and prominently in recent years after the 2008 recession. Sheldon Harber, President of Asset Strategies, Inc., explains its importance.
The Federal Reserve Bank has been in the news for many years but prominently in recent years after the 2008 recession.
Sheldon Harber, President of Asset Strategies, Inc., has watched the Federal Reserve Bank closely for decades, during good and bad economic times.
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Q: Not many people know what the Federal Reservedoes but they do know about low interest rates. Tell us what the Federal Reserve does and how it affects the average person.
Sheldon: The Federal Reserve in effect manipulates interest rates and I don't mean that in a negative way. It does so to speed up or slow down the economy. Today with interest rates at historiclows, companies can borrow money incredibly cheap to help them grow. Obviously the bigger the company is, the cheaper the cost is for them to borrow money and this is one of the reasons in my personal opinion has been helping the stock market grow this summer.
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Q: We hear the borrowing is still limited. Can this low interest rate go on forever? What would cause the Federal Reserve to raise interest rates?
Sheldon: There's a possibility that rates will start to go up when the Federal Reserve starts to see signs of an economic recovery. It's not there yet - it's mostly hope right now, I guess you could say we're waiting for the change. Rising interest rates could play a part in the factor in the strength of the dollar or could be the other way around and that's something we'll have to watch out for. As an investment advisory I worry about war or political strife around the world and if the United States gets involved in another conflict, that could cause interest rates to increase.
Q: How does the global economy affect decisions by the Federal Reserve in managing money?
A: Let's take Europe for example. As we hear more and more about the European economies slowing, that is not good for our dollar and that could result in the Federal Reserve lowering interest rates even more. So as much as we hear about these historic rates, there's many people who believe they'll be even lower.