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- December 2020
Economics article summary
   Fri Dec 18, 2020 12:14 pm

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Economics article summary

Permanent Linkby oliviafrancis on Fri Dec 18, 2020 12:14 pm

The Federal Reserve in the United States has the power of influencing the interest rates by either raising or lowering rates as a monetary policy measure to streamline the economy. The Fed had laid down strategies on raising the interest rates for the first time since the occurrence of the great depression in 2008. According to Binyamin, the Federal Reserve has had to slow down on the mission to raise the interest rates on grounds of global economic weakness. Greater caution regarding an increase in the interest rate should be taken as the prospects for domestic growth should receive thorough observation.
The Fed general expectations on raising the interest rates this year were to get implementation in the month of March, but things did not go according to the plan. The Federal Reserve policy-making committee voted against the prospects for a rise in the rates thereby giving room for other terms. The Fed officials now are left with the possibility of increasing them by about half percentage point this year. The Fed chairwoman liaises with the Central Bank in making decisions aimed at stabilizing the economic status of the United States. Yellen, the Fed chairwoman, acknowledged the relative optimism held by the Central Bank about the domestic economy. The chairwoman further reiterated the need for a halt on the anticipated interest rates rise based on prudence for the unforeseen wobbles in the weak global growth and financial markets. The essence of an accommodative path in economic projections gets demonstrated by Yellen in spurring growth.
The prolongation of the increase in interest rates got well received by investors, and this got exhibited by a sharp increase in the Standard & Poor's stock index just after the announcement. The investors in the outstanding stocks have recovered their losses after the rough start defining shares at the beginning of the year. The tightening of the financial conditions in the US led to the Fed officials backing away from the projected increments in the benchmark rate . The need to carry out extensive assessment and analysis on the impact of the rise on the market and the broader economy will dictate the decision adopted by the Federal Reserve officials. The Fed made it clear that plans for interest rate raise will get delayed but not derailed since plans for a gradual increase in the rates are still likely.
The Fed's chairwoman clarified on the principal reasons why the Federal Reserve was preparing to take slow moves towards interest rate raise. Firstly, the US has in the recent years gone faster concerning economic growth as compared to other developed nations and the weak economic growth still poses a continuing economic threat. Secondly, Yellen claimed that the tasks in the jurisdiction of the Federal Reserve are getting done by financial markets. The existence of tighter financial conditions faced by some corporations is tantamount to the Federal Reserve rate interest increases. A dissenting view on the increased interest rates gets depicted when the president of the Federal Reserve Bank of Kansas voted for the four stages raise anticipation whereby his only reason was that higher rates are appropriate given the US's strength in economic growth .
Economists and Central Bank officials expect the economy to increase systematically at a rate of about 2 percent, and this will go along with a gradual rise in inflation. Stirrings of inflation are becoming evident according to economists, but Yellen argues against the signal based on recent reports . Chief international economist and Fed officials claim that it is too early to harbor worries concerning inflation. The Fed officials further argued for the likely improvement in the US labor market since the economy is almost wholly absorbing the surplus of workers in existence.
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