Eight times a year, a group of 19 bankers, finance experts and economists gather for a two-day confab in an elegant cream- and-gold boardroom about a mile from the White House. After they're done analyzing the outlook for inflation and employment, Federal Reserve chairman Kevin Warsh, the leader of the group known as the Federal Open Market Committee, emerges and announces what the committee has decided to set as a target range for short-term interest rates.
The committee's goal — known as the dual mandate — is to set an interest rate that enables the economy to achieve price stability and full employment. It is enormously important to investors, savers, borrowers and business leaders whether — and how — the Fed achieves this delicate balance. Books have been written on how exactly the Federal Reserve influences investment markets, but here's a quick and rough summary.
