Federal Reserve and Interest Rates
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The paper discusses the Federal Reserve monetary policy and considers the effects of the Fed on America's economy. The paper reviews several articles on the impact of the interest rate on the economy and discusses the issues of credit availability and inflation. The paper also discusses the impact of Alan Greenspan in his position as Fed chairman.
From the Paper:"The Fed has now raised the federal funds rate four times in the last eight months, and is poised to raise it at least twice more later this year. Yet the economy continues to exhibit runaway growth. Doesn't monetary policy matter anymore?
Even during the mid-1990s there was some evidence that changes in interest rates did not have the same impact on real growth, as was once the case. During 1994 short-term rates rose three percentage points and long-term rates rose two points; yet the following year, the growth rate fell only 1.3 percentage points, from 4.0% to 2.7%. The old rule of thumb had been that a one-percentage point rise in interest rates reduced the real growth rate by one point the following year. By comparison, the 1990-91 recession was marked not only by rising interest rates, but also by an inverted yield curve and a cutback in credit driven by the reaction to the savings and loan scandals."
Cite this Term Paper:
Federal Reserve and Interest Rates (2003, October 08) Retrieved September 19, 2019, from https://www.academon.com/term-paper/federal-reserve-and-interest-rates-36450/
"Federal Reserve and Interest Rates" 08 October 2003. Web. 19 September. 2019. <https://www.academon.com/term-paper/federal-reserve-and-interest-rates-36450/>