Question

Why do managers of financial institutions care so much about the activities of the Federal Reserve System?

Short answer

As financial reserve system monitors the entire banking system of the nation

Step-by-step solution

Step 1. Introduction

The Federal Reserve System is the United States of America's central banking system. Central bank is the apex monetary authority in an economic system. It monitors money supply, foreign exchange rates, and serves several other purposes.

Step 2. Explanation

The management was quite concerned about the central bank's decision because the central bank has a lot of authority over the incentives given to enterprises, such as providing liquidity and issuing bonds. This causes the management to pay close attention to the central bank's decisions.