What the Fed's Doing and Why

Here's an overview of the Federal Reserve's been up to and why it should matter to you.
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Updated from 11:57 a.m. EDT, March 24

On March 18, the Federal Open Market Committee, led by

Federal Reserve

Chairman Ben S. Bernanke, voted to keep its key target interest rate at 0%, sparking a rally in stocks and a decline in the U.S dollar. Yields on the 10-year bond to decline the most they had since 1962, and gold and oil ended the day sharply higher.

A shock to the market was the statement from the FOMC that the Federal Reserve will increase the size of its balance sheet another $1.15 trillion by buying an additional $750 billion in agency mortgage-backed securities, fully backed now by government-sponsored entities

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

, and purchasing up to $300 billion of "longer-term Treasury securities over the next six months."

But what exactly is the Fed doing, and how does it affect the rest of us?

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