Monetary Policy of the Federal Reserve

Paper Summary:

This paper assesses the current state of the U.S. economy. The paper takes a look at the major current concerns of the Federal Reserve, such as inflation and recession. The paper then assesses the stated direction of recent monetary policy and the policy actions taken by the Federal Reserve to conform to the direction. The paper concludes with recommendations on how the Federal Reserve can manage the economy better.

Outline:
Current State of the US Economy
Areas of Concern
Stated Direction of Fed's Recent Monetary Policy
Recommendations on How the Federal Reserve can Manage the Economy Better

From the Paper:

"The new Chairman of the Federal Reserve intends to continue the policy direction of his predecessor, Alan Greenspan. ("Testimony of the Chairman...," February 15, 2006) From early 2001 to June 2004, the Fed had pursued a highly "accommodative" monetary policy in which the interest rates were constantly lowered to increase the money supply and ward off the threat of recession. From mid-June 2004 onward, the Fed started to raise the interest rates to reduce the chances of inflation and to stabilize the prices. Achieving long-term price stability continues to be the number one stated direction of the Federal Reserve's monetary policy. It intends to achieve such stability by keeping the long-term inflation rates low by keeping a close eye on the economic and financial indicators. Currently, the Fed believes that the long-term expectations of inflation are that it would remain low. Hence, the Federal Reserve intends to keep the interest rates at the current level in the short-term and to increase them slightly in case of further inflation pressures triggered by higher fuel prices."

Sample of Sources Used:

• "Testimony of Chairman Ben S. Bernanke before the Joint Economic Committee, U.S. Congress." (April 27, 2006). Federal Reserve Board. Retrieved on May 18, 2006 from http://www.federalreserve.gov/boarddocs/testimony/2006/20060427/default.htm
• "Testimony of Chairman Ben S. Bernanke Before the Committee on Financial Services." (February 15, 2006). Semiannual Monetary Policy Report to the Congress. Federal Reserve Board. Retrieved on May 18, 2006 from http://www.federalreserve.gov/boarddocs/hh/2006/february/testimony.htm
• Zakaria, F. (May 22, 2006). "The Real Story of Pricey Oil." Newsweek International. May 22, 2006. Retrieved on May 18, 2006 from http://msnbc.msn.com/id/12779051/site/newsweek/

More papers on Monetary Policy of the Federal Reserve:

• Term Paper # 149065 : "Monetary Policy and the Federal Reserve System"
• Analytical Essay # 1168 : "The Role and Policy of the Federal Reserve System"
• Research Paper # 103753 : "The History of the Federal Reserve System"

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