History of Federal Open Market Committee actions
Okay, so a long time ago there was a big problem in the United States called the Great Depression. During this time, many people lost their jobs and businesses struggled to stay open. To try and fix this problem, the government needed to come up with a plan.
One of the plans they came up with was called the Federal Open Market Committee (FOMC). The FOMC is a group of people who work for the government and meet regularly to decide what they should do to help the economy.
The main goal of the FOMC is to make sure that there is enough money in the economy for people to spend, but not so much that prices go up too much (this is called inflation).
To do this, the FOMC has a few different tools they can use. One of them is to adjust interest rates. Interest rates are like a fee you pay when you borrow money, and they can make it more or less attractive for people to borrow money.
When interest rates are low, it's easier for people to borrow money and spend it, which can help businesses grow and create more jobs. But if interest rates are too low, then it can cause inflation because there is too much money in the economy.
On the other hand, if interest rates are too high, then it can make it too expensive for people to borrow money and spend it, which can slow down the economy and cause job losses. So the FOMC needs to find the right balance.
Another tool the FOMC has is to buy or sell government bonds. A bond is like a loan that you give to the government, and they promise to pay you back with interest. When the FOMC buys government bonds, it puts more money into the economy, and when it sells them, it takes money out.
When the FOMC takes these actions, it can impact things like mortgage rates, credit card rates, and how much businesses can borrow. Ultimately, the hope is that these actions will help the economy stay on track and avoid problems like the Great Depression.
One of the plans they came up with was called the Federal Open Market Committee (FOMC). The FOMC is a group of people who work for the government and meet regularly to decide what they should do to help the economy.
The main goal of the FOMC is to make sure that there is enough money in the economy for people to spend, but not so much that prices go up too much (this is called inflation).
To do this, the FOMC has a few different tools they can use. One of them is to adjust interest rates. Interest rates are like a fee you pay when you borrow money, and they can make it more or less attractive for people to borrow money.
When interest rates are low, it's easier for people to borrow money and spend it, which can help businesses grow and create more jobs. But if interest rates are too low, then it can cause inflation because there is too much money in the economy.
On the other hand, if interest rates are too high, then it can make it too expensive for people to borrow money and spend it, which can slow down the economy and cause job losses. So the FOMC needs to find the right balance.
Another tool the FOMC has is to buy or sell government bonds. A bond is like a loan that you give to the government, and they promise to pay you back with interest. When the FOMC buys government bonds, it puts more money into the economy, and when it sells them, it takes money out.
When the FOMC takes these actions, it can impact things like mortgage rates, credit card rates, and how much businesses can borrow. Ultimately, the hope is that these actions will help the economy stay on track and avoid problems like the Great Depression.