Macroeconomic Unemployment

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.

Prices change because of the economy. Inflation is represented as a rise in the general price level. For example, prices of many goods and services such as housing, apparel, food, transportation, and fuel must be increasing in order for inflation to occur in the overall economy. If prices of just a few types of goods or services are growing, there isn’t necessarily inflation. Demand-Pull Inflation and Cost-Push In  cause an increase in the overall price level within an economy.  The Federal Reserve carried an informal inflation goal over a long period, only making its policy official in January of 2012, when it announced that it thought a policy which targets a 2% rate of inflation "is most consistent over the longer run with the Federal Reserve's statutory

Inflation is a general increase in the prices of all goods and services. Inflation occurs when the average level of prices in the economy increases over time. Even as overall prices are increasing, particular relative prices will change. The US Federal Reserve attempts to control and reduce inflation. Central banks focus is on strictly controlling inflation, protecting financial assets, and keeping labor markets strictly in check. Central Banks hold inflation more important than unemployment. Central Banks believe the only long-run impact of monetary policy is on the rate of inflation. They believe free-market forces in the real economy determine real output, employment, and productivity. To attain the targeted inflation rate, central banks influence credit creation and hence spending by frequently adjusting interest rates.

The discussion of whether the Federal Reserve should raise the federal funds rate is a highly contentious one. Members of the Federal Reserve (“Fed”) and academic economists disagree about what constitutes appropriate future macroeconomic policy for the Unites States. In the past, the Fed had been able to raise rates when the unemployment rate was under 5% and inflation was at a target of 2%. Enigmatically, since the Great Recession and despite a strengthening economy, year-over-year total inflation since 2008 has averaged only 1.4%—as measured by the Personal Consumption Expenditures Price Index (“PCE”). Today, PCE inflation is at 1-1.5% and has continuously undershot the Fed’s inflation target of 2% three years in a row. (Evan 2015) In the six years since the bottom of the Great Recession the U.S. economy has made great strides in lowering the published unemployment rate from about 10% back down to about 5.5%. In light of this data, certain individuals believe that the Federal Reserve should move to increase the federal funds rate in 2015 because unemployment is near 5% and inflation should bounce back on its own (Derby 2015). However, this recommendation is misguided.

This report discusses the association between the Federal Reserve System and U.S. Monetary Policy. It mentions that the government can finance war through money printing, debt, and raising taxes. It affirms that The Federal Reserve is not a government entity but an independent one. It supports that the Federal Reserve’s policies are the root cause of boom and bust cycles. It confirms that the FED’s money printing causes inflation and loss of wealth for United States citizens. It affirms that the government’s involvement in education through student loans has raised the cost of a college education. It confirms that the United States economy is in a housing bubble, the stock market bubble, bond market bubble, student loan bubble, dollar bubble, and consumer loan bubble. It supports the idea that the Federal Reserve does not raise interest rates because of the fear of deflating the bubbles they have created in recent years.

The United States government continues to attempt to control the stability of the economy through the monetary policies management of the United States money supply, being economically strong in the world’s economy is an attribute that the government continue to strive to maintain. Although theories leading to the Federal Reserve are controversial basic knowledge is important. This paper explores the monetary policies tools of the open market operations, discount rates, and the required reserve ratio. In the context monetary policies will be identified, explained, and the usages noted. Also highlighted is how the monetary policies are used to balance unemployment and high inflation. Monetary Policies plays a vital role in the upholding

In order for the Federal Reserve to fulfill their goal of moderate long term interest rates, stable prices and maximum employment, they rely on developing strategic changes to the monetary policy. Through monetary policy changes, the Federal Reserve can either restrict or encourage economic growth and inflation, thereby molding the macroeconomy into a state of consistent health. Overall, there are three tools used to modify the monetary policy, they include reserve requirements, discount rates, and open market operations. In an effort to promote price stability within the economy, these tools influence monetary conditions by affecting interest rates, credit availability, money supply and security prices. While one tool is use more frequently than the others, all three are necessary in establishing stable economic conditions.

Parkin (2012: 522) described inflation as “a persistently rising price level” and price level as “the average level of prices, and the value of money”. A price increase would cause people to buy less, and a decrease in demand for products would cause prices to fall. Parkin (2012) said that expected inflation is promoting a healthy and a strong

On September 18, 2013 the Federal Reserve reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In addition, the committee agreed to continue its monthly $85 billion purchase of Treasury and mortgage-backed securities as long as the unemployment rate remains above 6.5 percent. Inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal and longer-term inflation expectations continue to be well anchored .

Monetary policy has become more common now then how it used to be. The Federal Reserve has what is commonly referred to as a "dual mandate", to achieve maximum employment, in practice, around 5% unemployment, and stable prices 2-3% inflation. In this role, it lends to eligible banks at the so-called discount rate, which in turn influences the Federal funds rate (the rate at which banks lend to each other) and interest rates on everything from savings accounts to student loans, mortgages and corporate bonds In conclusion, Economic policies are the solutions that governments bring to the macroeconomic problem. Yet good policies are hard to find. A bad policy may be worse than nothing at all. Supply-side economic have been long recognized the importance of an economy's productive capacity, it's stock of labour and capital. Demand-side economic s has supported the government for the longest time ever, and has also increased many prices. Monetary policy has influenced the Federal

The FOMC is the Federal Open Market committee, which is “responsible for open market operations” and it wants to achieve the “maximum employment” along

As part of its dual mandate, bestowed by Congress in 1978, the Fed is charged with the responsibility of achieving so-called price stability. During the early years, there was some ambiguity as to what this exactly meant, but, under former Fed Chairman Bernanke, it became linked to the Federal Open Market Committee’s (FOMC) 2% long-term inflation target. There are a number of different measures of price pressures in the US economy, but the FOMC has always focussed on those that affect households, namely the consumer price index (CPI) and the personal consumption expenditure (PCE) deflator. The former uses fairly rigid weights on out-of-pocket spending on good and services, while the latter will adjust the basket weights to take into account product substitution by consumers due to price changes. The CPI will, therefore, not cover medical care bills paid by employer-provided insurance, Medicare and Medicaid. By contrast, such items are included in the PCE, thereby implying that the weight of medical care is significantly higher than in CPI. Meanwhile, the other major difference between these two inflation measures is shelter, which enjoys a much higher weighting in the CPI than the PCE. The FOMC has chosen the PCE as its chosen inflation target, although there is some confusion as to whether members are monitoring the headline or core measures. The CPI does, however, remain relevant: it is the benchmark measure of inflation against which

Inflation rates have had been an issue of concern globally. However, over the years it has been brought under control by numerous central banks of the world (Bernanke, Gertler, 2000). Nevertheless it cannot be said that inflation would not appear as matter of concern for the central banks in future but probably they will have other aspects to deal with (Bernanke, Gertler, 2000).

Inflation targeting has numerous advantages as a strategy for monetary policy. Unlike an exchange rate peg, inflation targeting enables monetary policy to focus primarily on domestic considerations and to respond accordingly to the domestic economy. (Mishkin F, 2000). Inflation targeting has the advantage that a stable relationship between money and inflation is not critical to its success. The strategy does not depend on this relationship, but rather uses all available information to determine the most appropriate settings of the inflation rate for the monetary policy. (Mishkin F, 2000) Inflation targeting also has the key advantage that it is easily understood by the public and is thus highly transparent. As an explicit target for inflation is created,

It widely recognized that the monetary policy within a country should be primarily concerned with the pursuit of price stability. However, it is still not clear how this objective can be achieved most effectively. This debate remains unsettled, but an increasing number of countries have adopted inflation targeting as their monetary policy framework. (Dr E J van der Merwe, 2002) This topic of Inflation targeting is a subject which immediately conjures different perceptions from different people. Many feel that low inflation should be a main aim of monetary policy, while others (such as trade union activists) believe that a higher growth rate to stimulate jobs should be the main concern.