Federal Reserve Monetary Policy

Submitted By johng1900
Words: 1634
Pages: 7
Open Document
Federal Reserve Monetary Policy
Team A
ECO/372
David Faiella
November 19, 2014
University of Phoenix

The American economy has been through Hell and back in the new millennium, and for some time economist speculated of the dismal circumstances to affect the U.S financial structure as a whole. This paper is going to highlight a variety of current macroeconomic indicators by specifically defining the objectives of the Federal Open Markets Committee and stating the economic projections for 2015 in hopes of painting a clear picture of the current financial state of the U.S economy. With growth reported in GDP and incomes this past year, there is still concern surrounding overall consumer opinions on the state of our nation’s economy. The results of the Michigan surveys index of consumer sentiment as included as well within the Monetary Policy (2014). This demonstrates the country continues to feel the economy is strengthening as well, as their overall confidence of their own financial situations. However, we are still well below average on the index report which also is reported without much change in the last year. Although we have improved our outlook since the recession that occurred in 2008, we remain guarded and safe in our observations. With slowly increasing consumer sentiment, housing starts continue to increase slowly along with our post housing bubble recession recovery (Monetary Policy, 2014). Single family and multifamily starts show a very slow trending increase but at a .6 high index for 2014, we continue to be well below the 1.8 index of 2005-2006, which was prior to the recession. Tighter mortgage loan requirements and significant constraints still on new housing supply is more than likely the reason to account for these results. The positive side of this is reflected though in the continued improvement being witnessed. While there remains to be a continuous increase in overall housing starts and sales, there is report of a current stall in this increase as of mid-2013 (Monetary Policy, 2014). Mortgage interest rates remain significantly low, but there was a visible spike upwards in 2013 which may be contributing to this occurrence. Interest rates were as low as 3.5% at the end of 2012 and are now being reported to be between 4-5%, yet these numbers in comparison to previous reports, are still historically low. Future projections predict there is likely to be a continued delay in growth of the current housing market until other sectors of the economy change their present course. In contrast to the slow increase in consumer sentiment and the housing market, financial developments are trending differently. In particular, interest rates or yields on 10 year treasury securities are on a declining trend dropping 50 basis points by the end of 2013 that continued through the beginning of 2014, all while at a slow declining pace (Monetary Policy, 2014). Some possible explanations for a slower increase could be the lower assessment of the overall global economy’s long run potential growth rate, and a decrease in long-run inflation estimates. Real gross domestic product (GDP) was reported to have decreased in the first quarter of this year, but the available information for the second quarter suggests that the decline was transitory. One of the major concerns is the housing market fell due to the high interest rate in the mortgage rates. Consumers are not in the market to buy new homes causing the market to show a drastic change in the market. The public in general is afraid of losing their homes to the economy and in addition to either a lack of availability of gainful employment. Along with these problems, there exist the issue of borrowing conditions for households and small businesses which have slowly improved, while credit flows to large nonfinancial corporations have consistently remained strong. Unemployment rates showed progress in the first half of the 2014 monetary report study
Show More

Related Documents: Federal Reserve Monetary Policy

China and Usa: a Comparison of Their Monetary Policies Essay

University of International Business and Economics China and USA: A comparison of their Monetary Policies. Mid-term Project School of International Trade and Economics BY Rebecca Bogiri Professor: LIN GUIJIN Beijing, China 2 December 2009 China and USA: A comparison of their Monetary Policies. By: Rebecca Bogiri December 2009 Abstract The monetary policies of USA and China is analyzed here from the perspective of their implementing bodies, their choice of instruments…

Words 3206 - Pages 13

Federal Reserve Pros And Cons

The Federal Reserve was created in 1913 by the United States Congress. Even though the Federal Reserve was implemented by the government, it is still a private and independent entity, although Congress will review the Fed from time to time. The Fed is made of of seven members, all of which are appointed by the president. After being appointed, all member must be approved or confirmed by the Senate. These members serve for a total of 14 years per appointment but can be reappointed if fitting. The…

Words 351 - Pages 2

Essay on Monetary Policy and Inflation

9 Problem Set 1: Monetary Policy and Inflation Joel Martens Economics 1. Consider an economy that uses gold as its currency. Define each of the three properties of money listed below. Considering these properties, is gold a good monetary system? a. Medium of exchange: any item that buyers give to sellers when they purchase goods and services. b. Unit of account: a standard unit in which prices can be stated and the value of goods and services can be compared. c. Store of value: the…

Words 986 - Pages 4

Monetary Policy Essay examples

Topic: "Briefly explain ‘Fractional Reserve Banking’ and discuss how shifts in bank reserve ratios can be used as a fiscal policy tool to stimulate/dampen economic activity." Fractional reserve banking is a banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system. It is the primary mode…

Words 1161 - Pages 5

Econ: Federal Reserve System Essays

also is used as money. Representative money - an item that has value because it can be exchanged for something else of value. Specie - gold or silver. Fiat money - has value because a government decree says it has value. Currency - coins and paper bills that most countries in the world use as money. Near money - financial assets that are similar to money, such as saving accounts. 2. Money serves as a medium of exchange, a standard of value, and a store of value. 3. Popcorn and oranges…

Words 3935 - Pages 16

Essay on Aggregate Supply and Demand

+Xn Aggregate Supply&Demand- A schedule or curve showing the total quantity of goods&services supplied at different price levels. Fiscal Policy- Changes is government spending&tax collections designed to achieve a full-employment&noninflationary domestic output. Name of our currency&who creates it? M1 coins issued by US Treasury, paper issued by Federal Reserve System M1&M2 levels of money. What’s counted? What don’t we count? Determinants of aggregate demand&effects?Change in consumer spending…

Words 482 - Pages 2

Questions on Fiscal Policy: Incentives, and Secondary Effects Essay

Economics Chapter 12—Fiscal Policy: Incentives, and Secondary Effects 124. Expansionary fiscal policy financed by government borrowing can lead to |a. |higher interest rates and lower private investment under the crowding-out view. | |b. |an increase in aggregate demand under the Keynesian view. | |c. |no change in aggregate demand under the new classical view.…

Words 4801 - Pages 20

Essay The Federal Reserve System

The Federal Reserve System Why do a research paper on the Federal Reserve System? This is a question we went over in our heads while making a decision on the type of research paper to do, what we wanted to learn more about and why. Over the past few years we have realized the impact that the Federal Government has on our economy, yet we never knew enough about the subject to understand why. While taking this Economics course it has brought so many things to our attention, especially since we see…

Words 2801 - Pages 12

ECON Practice Essay

effect on economic efficiency. 5) In explaining the evolution of money 5) _______ A) paper money is always backed by gold and therefore more desirable than checks. B) new forms of money evolve to lower transaction costs. C) government regulation is the most important factor. D) commodity money, because it is valued more highly, tends to drive out paper money. 6) The present value of an expected future payment ________ as the interest rate increases…

Words 5908 - Pages 24

Course Project Week7 Essay

FIN 364 DeVry University 02/15/2015 Topic proposal What are the effects of electronic transactions and banking upon the industry and/or monetary policy? Have innovations created greater or less efficiency? What has been the role of the Federal Reserve? Introduction Over the past decades, there is no developed as rapidly as computer technology and electronic communications. Nowadays information technology and especially the Internet is widely used in business. Advances in information…

Words 3322 - Pages 14