Monetary Policy Case Study
The FOMC is composed of twelve members and their meetings occur eight times a year. In these meetings, the monetary policy is voted on and decided by the members. The new changes are announced after the FOMC meeting. I think that the Fed policy decision by next FOMC meeting is important because based on their decision we know what will happen to interest rates. The expected change in rate is often priced into the markets before the announcement, so this can cause a drastic market action if the announcement is different from what was expected. I think that Fed will decide to keep raising the federal fund rates like it has been doing since December 2015. The future monetary policy under leadership of Jerome Powell of the Fed will continue to be gradual as long as the economy evolves as expected. Jerome Powell would most likely maintain the current monetary policy.
2) Do you feel that this near zero interest was necessary …show more content…
The government will have to finance and spend on infrastructure which can eventually create more government debt instead of doing the opposite. The problem with this proposal is that big deficit -financed package increases the chances of a potentially inflationary spurt in demand. I am concerned that the tax cuts can eventually cause the economy to overheat and to be inflationary. The tax cuts are supposed to cause an economic growth, yet the labor market is currently healthy. This can cause the economy to grow too quickly. The extra fiscal stimulus the tax cuts will provide and the current state of the economy (the economy already is perking), could quickly lead to overheating. In other words, we are adding more to an economy already operating near full capacity. Most of the tax cuts benefits are eliminated because they are financed largely by increasing the federal
2) Do you feel that this near zero interest was necessary …show more content…
The government will have to finance and spend on infrastructure which can eventually create more government debt instead of doing the opposite. The problem with this proposal is that big deficit -financed package increases the chances of a potentially inflationary spurt in demand. I am concerned that the tax cuts can eventually cause the economy to overheat and to be inflationary. The tax cuts are supposed to cause an economic growth, yet the labor market is currently healthy. This can cause the economy to grow too quickly. The extra fiscal stimulus the tax cuts will provide and the current state of the economy (the economy already is perking), could quickly lead to overheating. In other words, we are adding more to an economy already operating near full capacity. Most of the tax cuts benefits are eliminated because they are financed largely by increasing the federal