U.S. Federal Reserve Monetary Policy Research Papers

Examining recent U.S. Monetary Reports to Congress, it seems reasonable to argue that the overall state of the U.S. economy is in deep trouble. While the report notes that strong growth has been indicated in a number of business sectors across the country—i.e. housing, manufacturing and construction—the reality is that these surges have not been enough to hold down the unemployment rate. What this effectively suggests is that while the economy is showing some signs of recovery from the recession, in the short-term, the growth that is being produced is not stable. Given that the Federal Reserve is actively involved in ensuring short-term recovery for the U.S. economy, what this effectively means is that the Federal Reserve still has a long road ahead.

Custom U.S. Federal Reserve Monetary Policy Research Papers from Paper Masters

When considering the specific policies that are endorsed by the Federal Reserve, it becomes quite clear that inflation is a considerable concern for the organization. As Greenspan notes in his report to Congress, “With the inflation-adjusted federal funds rate barely positive, monetary policy should continue to provide substantial support to the growth of interest-sensitive spending. Low interest rates also have allowed businesses and households to strengthen balance sheets by refinancing debt on more favorable terms”. What this demonstrates about the Federal Reserve is that its central priority is keeping inflation low so that the country’s economic development does not spiral out of control.

With the realization that controlling inflation is the central objective of the Federal Reserve, some economists have argued that the Federal Reserve should enact monetary policy aimed at reducing the inflation rate to zero. However, it has been noted that if the inflation rate were zero or near zero, the Federal Reserve would find it difficult to control the economy in the short-term.