What is the Current Macroeconomic Situation in the US? In June 2012, Federal Reserve Bank of St. Louis President James Bullard states, “the current stance of monetary policy is ultra-easy, and remains appropriately calibrated given the macroeconomic situation in the U.S” (St. Louis Fed’s Bullard, 2012, par. 1). The statement, however, is ambiguous and subsequent information provided by Bullard contained no real clarifications. For example, Bullard explained that the “policy rate remains near zero” and a “large Fed balance sheet remains in place” (par. 4). In response to comments that the Fed’s actions have only produced “very low nominal and real interest rates across the yield curve” (par.6), Bullard explains that his calculations …show more content…
Seasonally adjusted, the CPI for all urban consumers increase 0.6% consecutively in August and September while the index for all items excluding food and energy increase 0.1% during the same months.
Euler Hermes also reported that GDP growth, income and consumption remain positive but “are growing at below-trend rates” (par. 1) and the housing market remains stagnant. The group further projects that GDP growth is expected to remain positive but weak with growth of about 2% in 2012 and 2013. In the third quarter 2012, real GDP increased at an annual rate of 2.0% (from second to third quarter) with a real GDP increase of 1.3% in the first quarter (Focus on Economic Data, 2012). Fiscal policy remains in turmoil with issues such as those relating to payroll and Bush tax cuts and the likelihood of lifting the debt ceiling again (Economic Outlook, 2012).
At the last FOMC meeting, the Committee found the economy has continued to expand at a moderate pace and it reaffirmed its commitment to “maintain a stable price level, economic growth, and full employment” (Focus, 2012, p. 1). However, the FOMC also knows that “without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions” and that “strains in global financial markets continue to pose significant downside risks to the economic outlook” (p. 1). To promote continued economic recovery and to keep a check on inflation, the
According to Staff review of the Economic Situation for January 28-29, the economic growth rate picked up in the second half of 2013. There was a gradual increase in the total payroll employment and a decline in unemployment rate. Consumer price inflation was still performing poorly than expected, while longer-term inflation expectations remained stable.
Eric Rosengren, President of the Federal Reserve Bank of Boston, and John Williams, President of the Federal Reserve Bank of San Francisco, have both been known as “doves” in their individual monetary policy opinions and votes over the last five years. Since the summer of 2015, there has been a notable change in Rosengren’s rhetoric in the pursuit of normalization to the point where Rosengren is now actively suggesting an increase in interest rates in the very near future in order to promote growth in the economy, and as of the FOMC meeting on September 21st, 2016, was one of three dissenting votes (out of ten) for keeping rates low. Rosengren supports his new change of face with factors that will be discussed at length in this paper such as the pace of growth, the up-sides to higher rates, and the danger lurking in a prolonged low-rate economy. In similar (but not identical) fashion, John Williams is turning to the belief that rate hikes will be necessary sooner, rather than later if the Fed wishes to continue to spur growth in the United States economy, as opposed to letting the economy overheat into recession. Williams supports this point with evidence similar to Rosengren involving the pace of growth, the upside to higher rates, and the danger lurking in a prolonged low-rate economy. Eric Rosengren’s recent flip provides an interesting vantage point on both camps in the Federal Reserve. By comparing and contrasting the rhetoric of Rosengren (a former dove) and Williams
Although business leaders may not have a crystal ball to help them plan for the future, they do have access to a wide range of Federal Reserve publications that can help identify recent and current trends and what these economists believe will take place in the coming months. Given the lingering effects of the Great Recession of 2008 on the American economy today, identifying the future economic outlook for America using this type of freely available information therefore represents a timely and valuable enterprise. To this end, this paper provides a review of relevant publications to identify the Federal Reserve's current assessment of economic activity and financial markets, its current view about inflation and various monetary tools that have been used to stabilize the economic and prices in recent years. Finally, an analysis of the economic outlook for the next 12- to 18-month period is followed by a summary of the research and important findings in the conclusion.
The last five years have shown that traditional monetary policies predicated on interest rate management by the Federal Reserve no longer deliver the economic growth they were once believed to. Keynesian economics has proved to not be as effective as once thought, which has led to the Federal Reserve choose alternative means to stimulate the economy and indirectly manage exchange rates (Hakkio, 1986). The uncertainty over interest rate polices has fortunately not led to increases in inflation, which has typically been the case in the past (Kopcke, 1988). The current economic conditions and the approaches the Federal Research are taking however are cause for concern, and from a personal standpoint many decisions are being evaluated more precisely.
Many observers believed that the 27-28 October Federal Open Market Committee (FOMC) meeting would be a non-event, largely due to the fact that there was no scheduled press conference after its conclusion. In fact, the press statement revealed some interesting insights into the current line of thinking of FOMC members. Most importantly, it is abundantly clear that the vast majority are still inclined to raise the federal funds target at the 15-16 December policy meeting. I have recently written about rising dissent on the Board of Governors, notably the views of Governor Lael Brainard. It appears that her openly questioning the policy apparatus of Fed Chair Yellen has yet to sway the opinions of other
The FED decided to carry out its bond purchasing program in August to help prevent deflation (Hauser, 2011). The article could have turned out much differently if the FED did not step up and take action. In addition the FED has the authority to adjust interest rates in accordance with the current economic condition. Currently the FED is willing to curb inflation by adjusting the interest rates at a moment’s notice (Hauser, 2011). The FED’s invisible hand can sometimes help prevent major economic disasters.
To begin, the article explains the Federal Reserve’s plan to take a careful approach to enacting contractionary monetary policies, policies used to decrease money supply, in the future. Last December the Federal Reserve raised the interest rates after they had been near zero for years to ensure inflation was kept in check and to promote economic growth. It appeared the economy would be in for another increase in the interest rates sometime this year, but the Feds have rethought that strategy. If the Federal Reserve were to continue to raise interest rates it would have short-run and long-run effects on the Money Market, Goods and Services Market, Planned Investment, Phillip Curve, and Aggregated Supply and Demand. These effects are aspects that have to be considered because they express and explain the effects the increase in interest rates has on the economy and explain if the Federal Reserve is enacting the correct policy to achieve their goal.
The steady growth of core inflation in late 2007 and the first half of 2008 appear to suggest that the Fed’s applied discretionary powers to avoid a tightening. In 2009 the feds needed to be
“They were the two spearheads of the two mutually strange civilizations, confronting each other for the first time after centuries of separate history.” When the Spaniard’s first set foot into the Aztec Empire in 1519, Cortés and Moctezuma’s confrontation revealed the inherent differences that existed between the two cultures. These two leaders examined each other and came to see that behind the two cultures lied centuries of separate history, and that on this day two alien planets had finally discovered each other. The Spaniard’s main advantages over the the Aztecs have been widely documented by western scholars as relating primarily to their possession of three thing: guns, germs and steel. Most historical narratives describe technologically advanced Spanish conquerors that brought with them from the “Old World” horses, steel and gunpowder, giving them an important upper hand against the Aztec warriors who bore stone-edge weapons. In addition, most scholars agree that tne of the most destructive factors were the germs that the Aztecs had never been exposed to. However, when the Spaniards came to conquer the Aztec Empire, one of the lesser known advantages that they had was the ability to understand this unfamiliar world. Unlike the Aztec king, Moctezuma, who had never seen Europeans, sailing ships, horses, steel blades, or body armor before, the Spanish conquistador, Cortés, recognized the similarities between the Aztec Empire and his own world based on his experience with
The Federal Reserves concerns are many; because of the economic diversity of our country. In November 2002, the fed reduced the targeted federal funds rate 50 basis points, to 1.25 percent. The policy easing allowed the Committee to return to an assessment that the risks to its goals were balanced. The Fed has inflation expectations well contained, and the additional monetary stimulus seemed to offer worthwhile insurance against the threat of persistent economic weakness and substantial declines in inflation from already low levels.
In this article Federal Reserve Chairwoman Janet Yellen stated that there is “no fixed timetable” for raising the U.S. interest rates. She also confirmed that rate increases will happen since strong labor market gain continue, which will push inflation above the current central back target. The current labor market has continued a growth trend and employers are adding new jobs each month. Additionally the unemployment rate has been held relatively steady. The chairman also warned that if job gains continue and unemployment drops further the inflation rate could rise, which will subsequently raise interest rates at a faster rate than planned.
The one-child policy is a population control policy that was introduced in 1979 to relive social, economic, and environmental problems in China. At the time the growth rate of China’s population was very high and the main purpose of the policy was to limit the large family units in the country to one child each. After implementing the policy, the government hoped to see reduction in the growth rate of its enormous population. Sometimes couples can have a second child only if their first was a girl or had disabilities. As of today, China’s government believes that their one-child policy will result in a wealthier, healthier
Therefore, the quantitative easing adopted from 2009 was trying to gradually resume sustainable economic growth. Quantitative easing has helped to avert what could have been a second great depression (Wall Street, 2011). The US economy has been clawing its way out of the recession in 2009 and recovery has been slow compared to previous economic cycles. Regular review of the pace of securities purchase by the Federal reserve and the overall size of asset-purchase program in light of incoming information and adjusting the program as need be will help foster maximum employment and price stability.
The European Central Bank (ECB) was the last to embrace quantitative easing, partly due to political constraints. By contrast, the Fed, under former Chairman Bernanke, did not face the same headwind and was prepared invoke three tranches of asset purchases due to elevated economic uncertainty. How times have changed! ECB President Draghi last week announced that an expanded round of quantitative easing could be invoked beyond September 2016 if financial markets sold off further and threatened to undermine the respective outlooks for economic growth and inflation. Forecasts for real GDP growth and consumer prices have already been reduced by the ECB and downside risks have been attached to these estimates. It appears, therefore, that the ECB under President Draghi is more prepared to behave like the Fed under former Chairman Bernanke. The reaction of Eurozone equity markets and the single currency to the ECB President’s announcement was textbook in nature. It appears that the strengthening of the euro versus the dollar in late-August did not please the ECB: President Draghi warned that negative consumer price inflation was likely in the latter months of 2015. Continued appreciation of the euro would only have intensified deflationary pressure. It appears, therefore, that the currency is once again being used as a safety valve. By contrast, the undershooting of US inflation and dollar strength does not appear to have deterred at
Have you ever just been yourself and done something nice and felt better? You might not know the joy you caused, but lots of people do nice things for example helping an old lady cross the street. You may not know it, but you probably made that person's day by just being yourself and lending a helping hand. In the novel, The Alchemist, by Paulo Coelho, Santiago learns, “When we strive to become better than we are, everything around us becomes better, too.” On his journey, Santiago encounters a king and learns some important lessons. Second, Santiago works at a crystal shop to earn money and helps the shopkeeper make money. Finally, Santiago learns about courage from the Alchemist.