Reference no: EM131757851

Assignment

If you make a comment to the topic and a response to other's comment, you can earn maximum 5 points of credit.

Your comment to each question has to be more than five sentences based on researched facts and logical analysis to earn the full credit. Also your response to other has to be more than five sentences based on researched facts and logical analysis to earn the full credit.

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 November 1st, 2017, Fed decided to maintain 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 further 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 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?

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 tinghten its monetary policy as an normalizing strategy?

6) 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 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?