The role of the Federal Reserve Against this backdrop, what role should the Federal Reserve perform to pursue its objectives? To answer this question, we must first understand exactly what those objectives are. The Federal Reserve was created by the Congress in 1913 to provide an effective backstop against the recurring episodes of financial panic that were relatively frequent at the time.
2  Chart 3  Output Gap 4  %  2  0  -2  -4  -6  -8 CY01  02  03  04  05  06  07  08  09  10  11  12  13  14  15  16  Note: The output gap is estimated by the Research and Statistics Department, Bank of Japan.