Most Recent Federal Reserve Monetary Policy Report example essay topic

Since its inception in 1913, The Federal Reserve, or as it is more popularly known as "the Fed", has played a very important role in the United States economy. (Colander, 2001, p. 333) For almost a century now, the Fed has impacted the way in which our economy operates, and the state it is in. Therefore, it is imperative that the views and opinions of the Federal Reserve are taken into consideration when evaluating current or future monetary policy. Through examination of its website, the Feds views on the state of the economy will be evaluated, along with its concerns on high inflation, the possibility of a recession, and its direction of recent monetary policy. The most recent Federal Reserve Monetary Policy Report, submitted to Congress on July 15, 2003, indicates that the state of the economy is improving and expanding, "the Committee judged that it would be prudent to add further support for economic expansion. The Federal Reserve expects economic activity to strengthen later this year and in 2004, in part because of the accommodative stance of monetary policy and the broad-based improvement in financial conditions" (web) Currently, the Federal Reserve is not very concerned with the possibility of a recession or high inflation.

However, rather than being concerned about high inflation, the Fed is very concerned with a decline in the inflation rate. As stated in the previously mentioned report, "because of the considerable amount of economic slack prevailing and the economy's ability to expand without putting upward pressure on prices, the Committee indicated that the small chance of an unwelcome substantial decline in the inflation rate was likely to remain its predominant concern for the foreseeable future" (web). Furthermore, monetary policy is a pivotal economic policy used the most in macroeconomics, and is a pivotal function the Fed is responsible for. According to Colander, "The Fed conducts and controls monetary policy, whereas fiscal policy is conducted directly by the government" (p. 333-334).

The Feds recent monetary policy would be classified as expansionary. As quoted from the Feds report, "The members of the Board of Governors and the Federal Reserve Bank presidents, all of whom participate in the deliberations of the FOMC, expect economic activity to accelerate in the second half of this year and to gather additional momentum in 2004". (web) This is proving to be true as the GDP came in at 7.2%, it's highest since 1984, and the most recent unemployment report was very encouraging. There is no denying the Federal Reserve's predominant mark on the US economy over the last 90 years. By working closely with the government, it has helped dictate economic policy during this time. Subsequently, its views are essential in gathering and deciphering information on economic activity. Upon examination of its economic reports, it was found that the improvement of the economy is gaining momentum, a decline in inflation rates are its main concern, and expansionary monetary policy is now underway.

Bibliography

Colander, D. (2001).
Macroeconomics. New York: McGraw-Hill Companies, Inc. Monetary Policy report to the Congress. (July 15, 2003).
Retrieved November 6, 2003 from the World Wide Web: web.