The Current Policy Rate Of The Central Bank Essay

* From the e-Activity, choose one (1) of the eight (8) steps in the Clarified Auditing Standards–Learning and Implementation Plan. Based on the step you have chosen, analyze support for the action plan proposed, and make at least two (2) recommendations that would improve support of the action plan.

For this assignment I picked “the role of the Federal Reserve” a mere recital of the economic policies of government all over the world is calculated to cause any serious student of economics to throw up his hands in despair (pg, 74). The Federal Reserve is now in the business of enforcing the United States government’s drug laws, even if that means making a mockery of both state governments’ right to set their drug policies and the Fed’s governing statutes. A Federal Reserve official who played a key role in the government 's response to the 2008 financial crisis says the government should do more to prevent a repeat of that crisis and should consider whether the nation 's biggest banks need to be broken up. Neel Kashkari says he believes the most major banks still continue to pose a "significant, ongoing" economic risk. The next ten years will see an explosion of government debt and an implosion of government’s ability to fulfill its promises. Any economic or investment model based on past performance under previous economic conditions will be worthless just as useless as the Federal Reserve’s models.

During the Federal Reserve meeting in April 2016, the range was left unchanged for federal funds at 0.25 percent to 0.5 percent (TRADING ECONOMICS, 2016). Labor markets experience growth confirmed by policy makers, yet economic activity was monitored as being slow (TRADING ECONOMICS, 2016). The risks associated with the financial developments of the country have ceased (TRADING ECONOMICS, 2016). The average percentage of interest rate in the U.S. averaged at 5.8. March of 1980 a record high was recorded at 20% (TRADING ECONOMICS, 2016). The lowest interest rates were recorded in the month of December 2008 at 0.25% (TRADING ECONOMICS, 2016).

The government may also use monetary policy in order to contain economic growth. Monetary policy refers to changes in interest rates in order to influence aggregate demand and economic activity. Monetary policy is conducted by the Reserve Bank of Australia, who use domestic market operations in order to change interest rates. If the RBA takes a loose monetary policy stance the RBA will purchase Commonwealth Government Securities in secondary bond markets. This increases the cash in the markets, and therefore pushes the overnight cash rate down. Interest rates will be lowered, which will result in higher consumer demand as the cost of interest on mortgages and credit card repayments will decrease. On the other hand a tight monetary stance results

The Federal Reserve System can also be referred to Federal Reserve or simply the FED. The Federal Reserve System is the central banking system of the United States. The Federal Reserve System was created over 100 years ago in December 23 of 1913. The Federal Reserve System was created in response to a series of financial panics particularly the panic of 1907. The panic of 1907 showed the need for central control of the monetary system if crises are to be avoided. Many events such as the Great Depression and the Great Recession led to the expansion of the role and responsibility of the Federal Reserve System. The U.S Congress established three key objectives for monetary policy in the Federal Reserve Act. The three key objectives for the monetary

It is clear that the economic policy in general and the monetary policy in particular should be concerned with the overall economic well-being. In this paper we propose to discuss this core topic. We will provide an overall picture of the functioning mechanism. In this regard, the discussion will develop around the governmental policies and of FED, and their scope on the free market. The argumentation will refer to the notion of common good and will try to establish if the measures applied by FED have fulfilled their intended purpose given the recent international financial crises of 2007.

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.

In an instant a single organization, with minimal government oversight, can influence entire markets and monetary supply of the country with the largest economy in the world. The United States founding fathers established a government system to distribute certain powers of the federal government to particular branches that have checks and balances in place to assure efficiency and openness among its divisions. One may assume that the organization that controls the monetary supply of an economic powerhouse of a country would have strong oversight and control over the policies they carry out. The Federal Reserve, also referred to as The Fed, has a purpose to protect and control the fiscal system of the United States to create a safer lending and borrowing market for private citizens, businesses, and the federal government. Americans perceive the Fed as an extremely powerful organization. Some have asserted, including Hillary Clinton’s spokesman, Jesse Ferguson, that “The Federal Reserve is a vital institution for our economy and the well-being of our middle class” (qtd. in Shapiro 7). Unfortunately, Federal Reserve financial policies have become detrimental to the growth of the national economy and the dollar, therefore, congressional actions against the Federal Reserve Bank are a necessity to avoid continuation of instability in both US and world markets.

The Federal Reserve’s goal is to keep the national inflation rate at 2 percent. This change is seen when buying groceries. The price of milk goes from $2 to $2.04. This can prove costly when the 2 percent is added over time. So, why is inflation out pacing minimum wage? The answer, because it will do harm to employees and business owners.

The Federal Funds Rate is the interest rate that Federal Reserve uses to trade funds with banks. Changes in this rate can trigger a chain of events that can be beneficial or devastating to the economy. If a bank is charged a higher interest rate to trade money or take out a loan, then the increase will be passed on to their customers, causing them to pay higher transaction fees or more interest. Each month, the Federal Open Market Committee meets to determine the federal funds rate. This in turn affects other short term interest rates. The determining rate immediately impacts the rates at which banks borrow money and the interest rates the banks use to charge their customers on loans. If the rate raise is too high, then money flow drops

The Progressive Era, from 1901 to 1918, was centered on change. There were four main goals of Progressivism: protecting social welfare, promoting moral improvement, fostering efficiency, and creating economic reform. President Woodrow Wilson, elected in 1912, made the most important change of the early 1900s; he passed the Federal Reserve Act.

Mr. Emanuel, in the current economic climate, the Obama administration’s course of action has been to pursue aggressive countercyclical fiscal policies designed to prevent further economic deterioration. Critics of these policies argue that:

The Federal Reserve went into action in response to the 2008 recession by rapidly reducing interest rates with the hopes of encouraging economic growth. The federal funds target rate was decreased to between zero and .25 percent. The results of the rate changes caused what is called “zero bound”, this reduced the effectiveness of monetary policy with the near non-existence of interest rates.

Monetary policy effects the GDP inflation. “Between 1996 and 2000, real GDP in the United States expanded briskly and the price level rose only slowly. The economy experienced neither significant unemployment nor inflation. Some observes felt that the United States had entered a “new ear” in which business cycle was dead. But that wishful thinking came to an end in March 2001, when the economy entered its ninth recession since 1950. Since 1970, real GDP has declined in the United States in five periods: 1973-1975, 1980, 1981-1982, 1990-1991 and

Forward Guidance is an unconventional monetary policy used by the central bank to provide path for future interest rates to individuals and businesses. Recently, the Bank of England has adopted this policy. In this essay, we will explain the rationale behind the use of this policy with the help of IS-LM model along with AD-AS model. The IS-LM model explains the relationship between interest and income level and changes in equilibrium level through the use of monetary and fiscal policy. Therefore, will be adequate in explaining the logic for applying this policy. Whereas, the AD-AS model may help in analysing the inflation condition of this policy.