Fed’s Main Job
The Fed’s main stated goal is to prevent inflation from overtaking the economy. Inflation is a persistent rise in the general price level, as measured against a standard level of purchasing power. This happens when the economy grows too fast. If the economy grows too slow we may see a recession.
The Fed controls the pace of the economy through interest rates and money supply. When we have higher interest rates, business growth and consumer spending slow down. This happens because it is more expensive to borrow money. If the economy slows too much, the fed will lower interest rates. This makes it less expensive to borrow money and promotes businesses to expand and consumers to spend.