Question

Discuss current/recent/historical FED decisions. Reasons for the decisions, ramifications, lessons learned.

Answer 1

FED has increased federal fund rate from 1.5 % to 1.75 % giving indication that US economy is recovering from recession and now inflation must be concentrated upon.

Growth rate of GDP is above 2 % and unemployment rate has reduced to 4.1 % which is considered full employment.

Hence, now Fed is likely to raise policy rate further in future ahead.

Increase in policy rate will reduce money supply and rate of interest would rise up. Increase in interest has strong ramification in term of inflow of FDI in US economy.