Reference no: EM132471880

Monetary policy

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 March 15th, 2017, Fed decided to raise the federal fund rate from 3/4% to 1%.

On June 14th, 2017, Fed decided to raise the federal fund rate from 1% to 1.25%.

On December 13th, 2017, Fed decided to raise the federal fund rate from 1.25% to 1.5%.

On March 21st, 2018, Fed decided to raise the federal fund rate from 1.5% to 1.75%.

On June 13th, 2018, Fed decided to raise the federal fund rate from 1.75% to 2 %.

On September 26th, 2018, Fed decided to raise the federal fund rate from 2% to 2.25%.

On December 19th, 2018, Fed decided to raise the federal fund rate from 2.25% to 2.5%.

On July 31st, 2019, Fed decided to cut the federal fund rate from 2.5% to 2.25%.

On September 18th, 2019, Fed decided to cut the federal fund rate from 2.25% to 2%.

On October 30th, 2019, Fed decided to cut the federal fund rate from 2% to 1.75%.

On December 11th, 2019, Fed decided to maintain federal fund rate at 1.75%.

Fed agrees that economic recovery is still moderate, Also Fed feels that the job market is strengthening and the long term inflation signs stabilized. But Fed also feel it is not necessary to maintain such accommodating easy monetary policy including very low interest rate, Since the unemployment continue to remain low  and inflation rate stays to remain near 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? To boost economy, is it a good or bad idea of negative interest rate policy?(0.5 point)

2) Do you feel that this  near zero interest was necessary one, or 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? (0.5 point)

3) Are you concerned about the inflation come back due to such easy monetary policy with zero interest rate for long time? if so, how fast is the Fed supposed to tighten its monetary policy as an normalizing strategy?(0.5 point)

4) Will the new president's proposal of spending increase on infrastructure and defense as well as tax cut on corporate income tax and individual income tax may overheat US economy to be inflationary? if so, will it cause Fed to speed up the rate hike? If Tariff over trade and possible retaliation could be inflationary, does it give another incentive for Fed to speed the rate hike?(0.5 point)

5) Is there any risk that  tight Fed policy may put US economy back into another recession,if tight Fed policy is ahead of curve by overshooting it , although it is gradual tightening? Can You predict how many times Fed will raise or cut FFR(federal fund rate) this year (due to global slowing down economy and protective trade policy)?

Go to the Fed web site(https://www.federalreserve.gov (Links to an external site.)) to find the Press Release under monetary policy.