Reference no: EM131569917
Discussion Essay
Your comment has to be more than five(5) sentences, based on researched facts and logical analysis to earn the credit.
On December 16th, 2015, FED decided to raise first time the record low target rate of federal reserve fund from 1/4% to 1/2%.
On December 14th, 2016, Fed decided to raise the second time the federal fund rate from 1/2% to 3/4%.
On February 1st 2017, Fed decided to maintain the target rate of federal fund rate between 1/2% and 3/4 %.
On March 15th, 2017, Fed decided to raise the federal fund rate from 3/4% to 1%.
On May 3rd, 2017, Fed decided to maintain the federal fund rate to 1%.
On June 14th, 2017, Fed decided to raise the federal fund rate from 1% to 1.25%.
Fed agrees that economic recovery is still moderate, Also Fed feels that the job market is slowly strengthening and the long term inflation signs stabilized. But Fed also feel it is necessary to maintain such accommodating easy monetary policy including very low interest rate until the unemployment improves and inflation rate goes up to 2.0%.
Fed decided that the size of the mortgage bond purchase as QE policy was winding down on October 2014 as the economy continues to improve.
The future rate hike will be gradual, depending upon the upcoming economic indicators.
1) What's your opinion about the Fed policy decision by next FOMC meeting?
2) Do you feel that this near zero interest is necessary one, or it is too late for the economy and may not work to save declining economy , due to liquidity trap? or can we be back in double dip recession due to too early exit strategy by the FED's tight monetary policy?
3) Are you concerned about the inflation come back due to such easy monetary policy with zero interest rate for a long time? if so, when is the best time for the Fed to tighten further its monetary policy as an exit or normalizing strategy?
4) Since the interest is near zero and Fed runs out of very valuable monetary policy tool, is any other option available for the FED to boost economy? Another QE(Quantitative easing of FED's bond purchase) policy? Operation Twist(Buy long T-bond, but sell short T-bill) to keep the long term interest rate low?
5) Will this low interest policy easy up the credit condition?
6) Will the new president's spending increase on infrastructure and defense as well as tax cut on corporate income tax and individual income tax be inflationary and speed up the interest hike?
7) Is there any risk that tight Fed policy may put US economy back into another recession,if tight Fed policy is ahead of curve , although it is gradual tightening?