Changes in the Federal Reserve’s monetary policy have been directly affecting the U.S. economy that includes the financial institutions and markets. For this Final Paper, select one large U.S....

Running Head: The Federal Reserve’s Current Monetary Policy    
The Federal Reserve’s Current Monetary Policy                        8
The Federal Reserve’s Current Monetary Policy
Nyla Smalls
Dr. Samuel Imarhiagbe
ECO 316: Financial Institutions and Markets
Ashford University
May 26, 2020
During July 2019, the Board of Governors decided to follow previous monetary poly regime of federal funds rate from 2‑1/4 to 2-1/2 percent. These rates were maintained, unchanged due to solid economic growth rate that increased at an annual growth rate of 3.1 percent.Thus showing a strong labor marketresulting in a decrease in unemployment at a 3.6 percent rate and the inflation decreased to 1.5 percent; which is below the committee’s objective of 2 percent.
Currently global economy faces health crisis of the COVID-19/Coronavirus outbreak. The committee is trying to achieve their goal of price stability and maximum employment. However, currently the economy is performing in the opposite direction. The COVID-19/Coronavirus outbreak has heavily impacted employment, inflation and economic activity. Several economic activities were slowed, and an immense number of people have lost their jobs. The pandemic has had a global impact on the world’s economy, not just the U.S. Flow of credit but the U.S. Business and households were affected by this issue. In order tackle the pandemic, the Federal committee has decided to maintain the target range for the federal fund rates at 0 to ¼ percent.
The current framework of the monetary policy of the Federal Reserve was initially adopted in the year 2012 was inclusive of symmetric 2% inflation target, along with the objective to support the maximum possible level of employment. The policy action taken up by Federal Reserve affects the current as well as the expected future interest rates. The current monetary framework of the Federal Reserve includes novice elements that were developed and introduced in the present century to influence the expectations of the future fed policy. The present paper attempts to review the current monetary policy framework in the context of the experience of the expansion that was propagated in the second half of 2009.
Performance of US economy:
According to Federal Reserve Report of 2020,the U.S. economic growth rate Real Gross Domestic Product(RGDP) grows at a moderate rate during second half of 2019.This period’s growth was shown to be slower compared to the first half of 2019 as well as the complete year of 2018 (Board of Governors of the Federal Reserve System, 2020). During this time, business investments were declined due to uncertainty of trade policy and due to weak growth in global economy. Consumption expenditure grows at moderate rate. The report also shows that the unemployment rate was reduced from 3.9% in 2018 to 3.5 % in 2019, which indicates the strength of the labor market at that time. By December 2019, the inflation rates remained below 2 percent. The Federal Open Market Committee (FOMC) has lowered the target range by a cumulative of 75 basis points, bringing it to the current range of 1-1/2 to 1-3/4 percent.
Federal Reserve Monetary Policy:
Recently, the U.S. economy has reduced the Fed fund rate from 2‑1/4 to 2-1/2 percent to0 to ¼ percent.The U.S. is facing several aspects of trade tension due to trade war,and now the global pandemic caused by COVID, thus lowering the economic growth. Due to lack of investments, business activities, credit and loss of employment in the nation created a lower pressure in demand for goods and services. Share prices in the stock market have seen some of the lowest prices in over a 5-year period due to the pandemic. In order to boost the economy, the government should increase the money supply. Although it was cause inflation, I believe that it can be countered and resolve itself. The Monetary Policy of...