Summarize the November 1-2 FOMC meeting. What did they directly or indirectly im
ID: 1228939 • Letter: S
Question
Summarize the November 1-2 FOMC meeting. What did they directly or indirectly imply? What recommendations did they make? Do you agree with the recommendations? Why or why not?Do you think the Fed should have dual mandate of price stability and full employment or just price stability. Explain your reasoning.
Do you think the Fed is acting responsible during this period of slow growth and higher than normal unemployment? Explain.
use - November 1-2 FOMC Meeting Minutes
Link: http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm#9662
General Information about FOMC
Link: http://www.federalreserve.gov/monetarypolicy/fomc.htm
Explanation / Answer
Summarize the November 1-2 FOMC meeting.
What did they directly or indirectly imply?
That the economy will not improve in the near future - and perhaps more frighteningly, that the Fed does not think it can do anything about this stagnation just yet.
What recommendations did they make? Do you agree with the recommendations? Why or why not?
The Federal Open Market Committee sought to foster maximum employment and price stability, and decided to continue its program to extend the average maturity of its holdings of securities as announced in September. In this respect, the FOMC basically chose to continue its current policy, assuming that the actions they take would not have substantial impact anyway. I disagree with this notion, as this maintanence of the 'status quo' regarding securities harms average lenders, who do not deal in securities but do deal in home mortgages and loans. Moreover, the committee seems to seek opposing goals - inflation comes with employment, and vice versa.
The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
Do you think the Fed should have dual mandate of price stability and full employment or just price stability. Explain your reasoning.
"The information reviewed at the November 1-2 meeting indicated that the pace of economic activity strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that weighed on economic growth in the first half of the year. However, labor market conditions continued to be weak. Overall consumer price inflation was more moderate than earlier in the year, as prices of energy and some commodities declined from their recent peaks. Inflation for other goods and services also appeared to have moderated, and measures of longer-run inflation expectations remained stable." In this respect, the mandate of price stability would have been reasonable - but full employment is still out of our reach.
Do you think the Fed is acting responsible during this period of slow growth and higher than normal unemployment? Explain. No. Though The Fed states that "The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability," their conclusion is essentially a cop-out of responsbility and activity - it's not a decision to act, but to sit back and watch.
use - November 1-2 FOMC Meeting MinutesLink: http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm#9662General Information about FOMCLink: http://www.federalreserve.gov/monetarypolicy/fomc.htm
Sources: http://www.streetinsider.com/Fed/Minutes+from+Nov.+1-2+FOMC+Meeting%3A+Some+Members+Showed+Interest+in+More+Easing/6970909.html
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