Question

What is the result of the most recent Federal Reserve change in Monetary policy? Has it helped or hurt the Economy?

Answer 1

The government has delegated monetary policy responsibility to the country's central bank, the Federal Reserve (Fed), but has taken responsibility for ensuring that the Federal Reserve complies with its mandate of over-employment, rate stability and medium-term interest rates. To meet the rate and its price orders, the Fed has set a long-term target of 2% inflation.

The Fed's control over recent monetary policy has had a knock-on effect on its ability to change supply and credit more broadly. Federal funds generally formulate economic policy by focusing on the rate at which banks borrow and lend on an overnight basis. The Fed tends to affect interest rates, such as capital expenditures on equipment, consumer household expenditures, and residential investments.

In addition, when interest rates vary between countries, capital inflows occur, which affect the exchange rate between foreign currencies, and as a result affect import-export costs. From this flow, monetary policy is likely to be used to stimulate total short-term spending. Monetary policy mainly affects inflation.

The relative independence of the Fed from the administration appears to have been echoed by a number of scientists as political pressure to formulate economic policies unsupported to focus on long-term stable inflation appears to be easing. But reduces the responsibility of independence to the administration. Therefore, the recent criticism of the Fed has raised the question of the right balance between the two. In early 2019, the Fed announced that it would permanently use this material to set interest rates.