Question

What are some of the important economic factors or current economic conditions are that shape the Federal Reserve’s monetary policy?

Answer 1

Important economic factors or current economic situation that will be shaping the monetary policy of federal reserve are as follows-

A. Demand and supply in the economy and expected demand and supply in the economy are one of the primary factors because they will be leading to generation of money flow in the economy.

B. Expectations of the inflation rate in the economy is another factor which will be playing a determinant role in monetary policy of the Federal Reserve.

C. Growth rate of of economy and Gross domestic Product Expectations of economy are another factor which would be accounted by the Federal Reserve before determination of a healthy monetary policy as it would be providing a detail view of progressive economy.

D. Risk of impending recession and changing economic cycles in the global scenario is another factor which will be accounted by the Federal Reserve before determination of a sound monetary policy.

E. Fiscal policy of the economy and balance of trade along with trade deficit and trade surplus will also be playing an important role in determination of monetary policy of the Federal Reserve.

F. Employment data and expectation of generation of employment will be playing another important role in overall preparation of of monetary policy by federal reserve