The Federal Reserve: Macroeconomic Analysis

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The primary objective of the Federal Reserve is to stabilize the monetary environment. The Federal Reserve has focused on achieving price stability and maximum employment while avoiding a recession. Within the goals of the dual mandate, the Fed encourages a target inflation rate of 2 percent and the unemployment rate between 4.5 percent and 5.0 percent to maintain a healthy economy. As of today, the inflation rate is 2.3 percent and the unemployment rate is 4.2 percent.

Over the past decade, the Fed has responded fairly to inflation and unemployment. According to the Federal Reserve (2017), between late 2008 (the era of the Great Recession) and October 2014, the Federal Reserve purchased longer-term mortgage-backed securities and notes issued by certain government-sponsored enterprises, as well as longer-term Treasury bonds and notes. In essence, lowering the level of longer-term interest rates and improving financial conditions (the, 2017).


During the 2008 financial crisis, the Federal Reserve adopted an expansionary
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Referenced from Amadeo (2016), the open market operation is a tool that the Fed buys or sells securities, typically Treasury notes, from its member banks. It buys securities when it wants them to have more money to lend. It sells these securities, which the banks are forced to buy. This leads to the banks having a reduction in capital and less to lend that will result into banks charging higher interest rates. That slows economic growth and clean s up inflation (the, 2016).

Amadeo, K. (2016, October 2016). What Is Being Done to Control Unemployment? Retrieved October 30, 2017, from

The Federal Reserve. (2017). Retrieved October 30, 2017, from

U.S. Bureau of Labor Statistics. (2017). Retrieved October 30, 2017, from
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