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The Federal Reserve is the U.S. Central Bank. It was created by the Federal Reserve Act of 1913 to establish a monetary system that could respond effectively to stresses in the banking system.

One of the roles of the Federal Reserve is to conduct monetary policy by influencing market interest rates to achieve the goals of maximum employment, stable prices as interpreted as 2% inflation on average, and moderate long-term interest rates.

The Federal Reserve president is Jerome Powell, a name well known by investors. He was appointed by President Trump and reappointed by President Biden. Monetary policy and related decisions by the Federal Reserve are made independent of the president and congress.

When inflation roars, the Federal Reserve raises interest rates. This increases the cost of borrowing and makes things like purchasing a house, vehicles and most everything else more expensive. The result is eventually a slower economy with declining interest rates. In other words, inflation hurts and getting inflation under control also hurts.

Inflation and the economy have been major concerns of mine. The current annual inflation rate is 2.5% but prices are 21.2% higher than when the pandemic-induced recession began in February 2020, according to Bankrate. I personally believe it has been far worse, particularly with food, consumer staples and housing.

Catastrophic events and actions by the President and Congress can also affect the inflation rate and economy.

Government reported economic inflation numbers can be misleading. I have never trusted any government-reported number. I believe they are manipulated. What I feel is a much better indicator for me. The economy appears strong based on reported numbers but people are struggling.

The one thing that hasn’t struggled is the stock market. It has increased dramatically during the Trump and Biden administrations. What the stock market does can be a mystery. One thing for sure is the rich have gotten richer. Being a millionaire barely counts anymore. You have to be a billionaire to be noticed.

What does this have to do with me? Like a lot of old people and others, I follow the stock market. I’ve learned that financial analysts live and breathe on what the Federal Reserve does with interest rates and what Jerome Powell states about the economy. I’m always interested in seeing the reaction of the stock market to the Federal Reserve. A single word can make a difference to how the stock market reacts.

Most people use the services of a financial advisor or invest in mutual funds to build their nest egg for retirement. Some people do their own investing. The performance of their investments can be good or bad.

It depends on how much time and effort a person puts into managing their investments. Financial advisors do this work for an investor and can offer constant advice on the market and economy. In other words, they do the work, making your life easier.

If you’re a young or middle-age individual counting on the government to fund your retirement with social security, don’t count on it. It probably won’t be the same social security we have now. Invest as much as you can for your retirement and your children’s future.

Al Klemm is a Washington resident and a former Beaufort County Commissioner.