Monetary Policy

Introduction The federal Reserve System, often referred to as the Fed, is the fundamental bank of the United States. It was created on December 23, 1913, with the signing of the Federal Reserve Act by President Woodrow Wilson. The Fed conducts the populations monetary policy by influencing money and credit conditions in the economy. (The Federal Reserve Board, 2006) Monetary policy is one of the tools that the political relation uses to influence the economy in order to achieve frugal stability. The Fed step-ups or decreases the money supply to influence puffiness, unemployment, cheer rates and economic growth. (Financial Pipeline, 2006) State of the Economy According to the July 2006 Monetary form _or_ system of government Report to the Congress the economy is currently in a rural area of transition. The economy has been relatively stable over the former(prenominal) few years even with some of the youthful disasters that squeeze it such as September 11 and Hurricane Katrina. Inflation pressures retain been elevated thus far in 2006. (Bernanke, 2006) This is due to the raising in price of crude oil and its contribution to the increase of aught costs. The rise in price of gasoline and high temperature oil caused a rise in price of a variety of other goods and services.

Over time, pressures on inflation should lessen as the pace of real activity moderates and, as futures markets suggest, the prices of energy and other commodities roughly stabilize. The resulting easing in inflation should ease contain long-run inflation expectations. (Bernanke, 2006) In the beginning of the year, businesses were adding jobs at a robust pace. This caused a noticeable decrease in the unemployment rate. Since that time, the unemployment rate has remained relatively steady. Another contributing factor to the state of the economy is the recent rise in consumer spending. This rise whitethorn be a bit surprising due to the recent inflation caused by the increase in oil prices. This inflation has been matched by an increase in nominal wages and salary... If you unavoidableness to get a full essay, order it on our website: Orderessay

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