Monetary Policy Paper

Essay by marymax34University, Bachelor'sA+, August 2007

download word file, 3 pages 4.0

The Federal Reserve is the central bank of the United States. It was created to provide the country with a stable banking industry. Since its creation in 1913, the Federal Reserve System has taken on many roles in the economy. The nation depends on the Federal Reserve System to implement monetary policy in pursuit of the economy's best interest, supervise banks, protect consumers and maintain the nation's financial stability by containing systemic risks. The Federal Reserve also provides services to the United States Government and regulates the nation's payment system. (The Federal Reserve [TFR], 2005)According to the latest Monetary Policy Report to the Congress the economy expanded at a good rate for the first half of this year. The year started with robust spending due to federal spending on hurricane relief and favorable weather for homebuilding. By spring, expansion had slowed slightly due to less consumer spending as a result of higher energy prices.

Higher mortgage rates caused homes sales to drop noticeably from last year. Increases in demand and production have been steady and the demand for exports has been supported by high levels of economic activity abroad. The unemployment rate has moved down but the jobless rate is still steady. (The Federal Reserve [TFR], 2006)This year, factors which cause inflation have increased. High cost for crude oil contributed to increased price for domestic energy. This years increase combined with the increases from the last few years have not only boosted the price of gasoline but increased inflation in a variety of goods and services which caused the core consumer inflation rate to rise. Despite all of these factors inflation expectations and labor costs have continued to be contained. The United States economy seems to be in a transition period which is leading to a moderate and sustainable...