| Here are a few facts to help dispel some myths about the Federal Reserve System, how it affects people's
lives, and how it works: |
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| MYTH: |
The Federal Reserve System is a branch of the military. |
| FACT: |
President Woodrow Wilson signed the Federal Reserve Act on December 23, 1913, to establish the Federal
Reserve as an independent central bank for the United States. The Federal Reserve is not associated with any branch of the military. |
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|
| MYTH: |
The Fed has little to do with the lives of ordinary citizens. |
| FACT: |
The Federal Reserve affects the economic and financial decisions of virtually everyone--from a family
buying a house, to a business expanding its operations, to a consumer choosing a sound financial institution. In the global economy,
the Federal Reserve's actions have significant economic and financial effects around the world. |
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|
| MYTH: |
Actions of the Fed hurt rather than help people. |
| FACT: |
Federal Reserve policies seek to help people and businesses by fostering a sound banking system and
a growing economy, with maximum sustainable employment and stable prices. The Fed's monetary policy actions affect the overall
level of prices, economic growth, and employment in the country. Monetary policy cannot target specific industries or regions within
the country. |
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|
| MYTH: |
Controlling inflation puts people out of work. |
| FACT: |
Stable prices help create jobs and raise incomes. Fluctuating prices distort consumer and investment
decisions, thereby adversely affecting employment and growth in the economy. |
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|
| MYTH: |
The Fed sets interest rates at whatever level it pleases. |
| FACT: |
The Fed influences short-term interest rates in the economy to achieve its goals of stable prices, maximum
sustainable employment, and steady economic growth. |
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|
| MYTH: |
The Fed is so powerful, it can ignore economic conditions in other countries. |
| FACT: |
Global interdependence, through international trade and investments and exchange rate fluctuations,
compels the Fed to consider economic conditions in other countries in its monetary policy decisions. |
