Economics IA Essay

The U.S. employment rate has fallen, resulting in the addition of 173000 jobs, which is below expectations. This is mostly due to people searching for jobs or giving up on doing so. This, along with a jittery stock market and uneven growth, has created doubt in the U.S. economy’s ability to handle a rate increase. Inflation and economic growth also contributes to the unemployment rate in the U.S.

Currently the unemployment rate is twenty-three percent (Roberts). That is a very high rate compared to past when

Based on the general indicator it would seem as though in the short term the economy is growing from the recession with a high level of real GDP growth of 5%. However, with the continuously increase in oil price may hold the overall economy from going well as expected. Moreover, the exchange rate for both UK and Canada that continuously appreciate against US may affect consumption by consumer and the operation of the company.

Furthermore, there is a decent chance of an upside surprise to 2014 growth. Rational investor’s investments, spending and confidence are still below than the expected level what would be considered normal levels by the standards of past economic expansions. As the job growth becomes strong and consumers feel more protected then a righteous way of spending is getting better, more consumer income begetting more spending could be initiated. If this occurs rapidly then the quarterly growth is likely to exceed an annually at the rate of 3%. But if this does not happens in 2014 than it is nevertheless very likely to happen before the end of 2015. (Payne, 2014)

In the Wall Street Journal Article “Fed Forecasts for the Economy and Interest Rates Could Edge Down” the author of the article Jon Hilsenrath wanted to address the future rises of interest rates that are soon to come and the effects that those rises will have on the now growing economy.

Given the power to formulate and implement monetary policies, the Bank of England (the Bank) declared its independence in 1997, taking charge of maintaining price stability and supporting the economic policy of Her Majesty 's Government, including its objectives for economic growth and employment. In the following sections, the paper will attempt to assess the Bank’ work and its policies that has been carried out during the economic downturn.

The Fed's chairman Janet Yellen, said that holding a rise in interest rates would mean that the central bank could have to do so more quickly if caught behind the line.

The Fed has, over the past few years, been lowering its estimate of long-term potential real GDP growth. Presently, the Federal Open Market Committee (FOMC) believes the US economy is capable of sustaining expansion of just +1.8% per annum. This estimate is based on two components: 1) anticipated labour force growth of +0.3% pa, and 2) annual productivity increases of +1.5%. Given the Fed’s commitment to its 2% long-term inflation target, this backdrop would consequently imply that wage inflation should be running at around +3.5% when the economy eventually hits full employment. Average hourly earnings have been ticking up recently, thereby confirming that the US labour market is tightening, although the annual increase is still below +3%. There is, however, still some slack in the labour market, as characterised by the “U6” measure of underemployment which is still 150 basis points above its low reached during the previous expansion. Fed Chair Yellen has been prepared to wait until broader measures of labour underutilisation, such as U6, improve further. The luxury of being able to sit pat is, however, now fading. Financial markets now expect the FOMC to raise the federal funds rate at this year’s final policy meeting next month. Meanwhile, the FOMC will still be keen to stress that any subsequent rate hikes will remain gradual. This seemingly benign outcome may, however, be beyond its control: fiscal policy will be eased in 2017,

“If interest rates stay low for another three or four years, all bets are off as to how many follow,” said Lawrence Rybka, president of ValMark Securities, an insurance and brokerage firm in Akron, Ohio.

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.

The purchasing power of customers is going to reduce, and Fed tries to prevent swelling from running. The retreat of wholesale expenses gives the Fed more breathing space to keep investment rates at record lows. Numerous economists gauge that the Fed will begin bringing rates up in June. Different patterns are likewise keeping costs low. Normal compensation has climbed only 2.1 percent beneath the 3.5 to 4 percent that is average in a sound economy. That makes it harder for purchasers

The period of unchanged rates “does say something about the depth of the financial crisis and the anemic recovery,” said Eric

The Governor of the Bank of England Mark Carney implemented a strategy called ‘forward guidance’. He does not want high interest rate until the unemployment rate has fallen to 7%or below and the criteria including a quantitative project of inflation should be less than 2.5% in the medium term. The theory of forward guidance is actually a promise of future interest rate set by the central bank. It has been an important part of monetary policy; so it said to rescue UK economy by apply this policy. This tool is using in US and Canada in this moment. Therefore, we already have a guideline to look at before the central bank goes wrong.

Overall economic conditions are expected to improve over the next two quarters. As part of the monetary policy (quantitative easing part 3), Federal Reserve continues to buy bonds to influence low interest rates in order to increase investments. A decrease in unemployment and an increase in private consumption will drive the economic growth for the next two years.

The urgency to recover lost ground is, therefore, clear. Although the economy has improved, the growth forecast for the immediate future is less reassuring. The challenge is how to stay on course and sustain the momentum in the face of what appears to be a prolonged slowdown in the world economy and the precarious state of public finances.