The federal reserve Essay Example | Topics and Well Written Essays - 1000 words - 1

The federal reserve - Essay ExampleClose co-ordination between the Federal curb and the Government of the USA is essential, because monetary policies should be in sync with fiscal policies for an effective and sustainable scotch growth in the long run.The steps taken by the Federal maintain, for example by change magnitude the interest rates to reduce inflation will have an impact on industrial production, whence on employment. Therefore regulating interest rates in an economy by the Federal Reserve is a balancing act which takes into account several factors after analyzing the frugal indicators. The Federal Reserve has an resource of regulating money supply in the economy to regulate growth. Providing liquidity into the economic system by regulating money supply has its impacts on financial markets. Handa (2009, p. 429) observed Many central banks, especially in financially developed economies, nowadays choose to use the interest rate, rather than the money supply, as the au tochthonic monetary policy instrument, while leaving the money supply endogenous to the economy. Any change in the federal fund rate has cascading effect on short-term and long-term interest rates, foreign telephone exchange of USD and stock prices. The cumulative effect of these impacts reflects in demand patterns and eventually spending by the businesses. In an economic slowdown, if the situation remains unchecked the multiplier effect caused in this process might lead to corner in the economy. Therefore, the role played by Federal Reserve in stabilizing economy through and through its monetary policies is very significant.Since policies of the Federal Reserve are concerned with employment, inflation and output, the economic indicators which are applicable in this regard are required to be carefully analyzed by the Federal Bank. some(prenominal) economic indicators relating to employment, inflation and output or growth are used for this purpose. Analysis of the National trade Report will be useful in assessing the