Assignment task: Monetary policy
On July 31st, 2019, Fed decided to cut the federal fund rate from 2.5% to 2.25%.
On September 18th, 2019, Fed decided to cut the federal fund rate from 2.25% to 2%.
On October 30th, 2019, Fed decided to cut the federal fund rate from 2% to 1.75%.
On March 3rd, 2020, Fed decided to cut the federal fund rate from 1.75% to 1.25% due to economic concern from coronavirus.
On April 29th, 2020, Fed decided to cut the federal fund rate from 1.25% to 0.25% due to economic concern from coronavirus.
On November 3rd, 2021, Fed decided to start tapering of Bond Purchase Program.
On March 16th, 2022, Fed decided to raise the federal fund rate from 0.25% to 0.5% to control inflation.
On May 4th, 2022, Fed decided to raise the federal fund rate from 0.5% to 1% to control inflation.
On June 15th, 2022, Fed decided to raise the federal fund rate from 1% to 1.75% to control inflation.
On July 27th, 2022, Fed decided to raise the federal fund rate from 1.75% to 2.5% to control inflation.
Fed feels that the job market is strengthening , but the inflation is picking up. Although Fed feel it is necessary to maintain such accommodating easy monetary policy including very low interest rate until the unemployment improves further and inflation rate goes back down to 2.0%, Fed started to switch to tight monetary policy such as QT (quantitative tightening) policy and the rate hike in 2022.
1) What's your opinion about the Fed policy decision by next FOMC meeting?
2) Do you feel that this near zero interest was necessary one, or may not work to save declining economy, due to liquidity trap? Or can we be back in double dip recession due to too early exit strategy by the FED's tight monetary policy?
3) Are you concerned about the inflation come back due to such easy monetary policy with zero interest rate for long time? If so, how fast is the Fed supposed to tighten its monetary policy as an normalizing strategy?
4) Will the new president's proposal of spending increase on infrastructure with excessive liquidity of easy Monetary policy may overheat US economy to be inflationary, due to supply chain bottlenecks? Will it be a sustaining inflation due to rising wage and rising raw material cost such as energy cost with Ukraine issue? if so, will it cause Fed to speed up the rate hike? If Tariff over trade and possible retaliation could be inflationary, does it give another incentive for Fed to speed the rate hike? Or do you think Protective trade policy can contribute to prevent the overheating economy?
5) Is there any risk that tight Fed policy may put US economy back into another recession, if tight Fed policy is ahead of curve, although it is gradual tightening? Do you think US will be in recession this year (Year 2022)? Yes or No. Do you think US economy may fall into a stagflation due to too fast tight monetary policy and bottlenecks of supply chain? Yes or No. Can you predict how times and how much Fed will raise FFR (federal fund rate) in 2022?