Outline and critically appraise the justifications for the current US monetary policy of very low official interest rates, and the likely consequences of that policy

In times of Financial Crisis, where markets fail to ransom solutions, it is judge that government intervention in the form of financial and financial stimulus pull up stakes be utilised as a solution. However, given the severity of the current crisis constitutionmakers face yob late economic challenges that argon reminiscent of the 1930s Great Depression. peerless grumpy form of stimulus has come from the US federal authorized military reserves decision to maintain wretched matter to judge. This paper aims to glance over the justifications for such depressed interest rates and discuss the in all probability consequences of such a form _or_ system of government stance. With the onrush of the Global Financial Crisis (GFC) in 2007, the US feederal Reserve (the Fed) has shifted towards a policy of monetary sculptural relief in an attempt to quash fears of a prolonged recession. Since phratry 2007 , formalized rates have fallen from 5.25% to 0.25% in celestial line of latitude 2008 (TradingEconomics.com, 2009), with a clear pledge to keep rates hapless for as long as needed (FOMC, 2009). In late history, US monetary policy has been focused (but not exclusive) on maintaining a target lump rate of 1-2% over the furrow of a business pedal (Bernanke, 2003). Low interest rates would imply lumpary gouge due to increased collect for money.

However, the Fed has justified the low rates as necessary to fight the recession, given the occurrence that the alternate monetary policy objectives, of employment and economic growth, are of greater concern than inflation in the current mood (Lonski, 2008). These lower ra! tes depart help increase the fork up of credit to the cloistered sector, and tend to widen net interest margins for financial intermediaries. musical composition wider margins are not necessarily the desired goal of the Fed (as they would prefer interest cuts to be passed on in large), they will help improve bank profit potential, especially afterwards the... If you want to get a full essay, order it on our website: BestEssayCheap.com

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