Question

Talking about the Fed, The Chairman of the Federal Reserve has been given the title as “the 2^nd most powerful person in the free world”. Would you agree with this statement? Why or why not?

Answer 1

Yes, I agree totally with this title as it is a very powerful position.

The Federal Reserve System is the US’s central bank. It is a network of 12 regional banks dispersed across the country in places like New York and San Francisco. Put simply, the Fed is responsible for regulating the US banking system and directing monetary policy—namely, by setting the short-term interest rates that banks charge each other, a key factor in loosening or restricting the flow of credit to businesses, individuals, and other borrowers. It aims to set rates at a level that strikes the right balance between inflation and employment, keeping the economy on an even keel and not running too hot or cold.

The Board of Governors are seven people nominated by the president to oversee the Fed. They can serve a full 14-year term, plus whatever was left of an unexpired term if their predecessor did not complete their full term. The Fed chair is the leader of this group, and serves a four-year term

The Fed chair is the public face of the board of governors and testifies to US congress twice a year on the state of the economy and monetary policy. Besides presiding over meetings and setting the agenda, the chairperson does not officially have any more power than the other six governors. Fed decisions are made by consensus, and the chair’s opinion does not, by law, carry any additional weight.

The Fed chair is the boss. The financial world hangs on a Fed chair’s every word, since they speak for the world’s most important central bank and set policy that affects the global reserve currency.