Fed S Policies example essay topic

Alan Greenspan, chairman of the Federal Reserve Board: President Clinton appointed Alan Greenspan, a well-known chairman of the Federal Reserve Board, to his fourth term as the chairman of the nation's central bank. Alan Greenspan accepted the chance to lead the Federal Reserve Board for another four-year term beginning June of 2000. President Clinton praised Greenspan for starting a 'New Era', an era with high technologies and productivity to advance. He is expected to push the level of prosperity to a higher stage. Alan Greenspan is known as a man of his profession to realize the power and impact of new technologies for the 21st century. The Fed's job of stabilizing output in the short run and promoting price stability in the long run is made more difficult by two main factors: the long and variable lags in policy, and the uncertain influences of factors other than monetary policy on the economy.

This raised an important question, what problems are caused by other influences on the economy? Output, employment, and inflation are influenced not only by monetary policy, but also by such factors as our government's taxing and spending policies, and the introduction of new technologies etc. As we step into the 21st century, the wide spreads of computer industries and advance technologies have enhanced the productivity. When workers and capitals are more productive, the economy can expand more rapidly without creating inflationary pressure. U.S. today has experienced a capability surge brought on by the utilization of computer and hi-tech developments. The issue of monetary policy maker is how much faster productivity is increasing and whether those increase are temporary or permanent. With all these uncertainties, the board has to know how and when Fed.'s policies will affect the economy?

Fed looks at a wide range of indicators of the future course of employment, output and inflation. Indicators induces the measure of money supply, unemployment rate, real interest rate, nominal and real GDP growth, etc... With so much variation of possibilities, policymakers basically have to rely on their own judgement about the directionality of these indicators. They based on these foreshadowing to formulate strategies to maintain the economy at its top condition. In order to have a desire effect on the economy, the Fed must take into account of the influence of these indication, either offset them or reinforce them as needed.

This require difficult decision making, because these development occurs unexpectedly, the size and timing of their effects are difficult to estimate. According to our today's economic indicators, investors do expect Fed.'s Policymakers to raise rate again at least once more early this year. The Fed funds future contract for February is currently yielding 5.76%, more than a quarter-point above the current 5.5% rate. The Fed.'s first policy meeting of the new millennium will be held on February 2, 2000.