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List the steps the Federal Reserve has taken over the past decade in order to increase...

List the steps the Federal Reserve has taken over the past decade in order to increase the growth rate in the personal consumption expenditures deflator. Why have these actions been unable, so far, to raise the inflation rate up to the Fed's 2% annualized target?

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Answer #1

Federal Reserve has undertaken expansionary monetary policy initiative like reducing federal funds rate, cash reserve ratio, statutory liquidity ratio to boost liquidity in market and enable corporate to promote higher capex and generate employment. Moroever, the Fed has announced bond buying through OMO which also has resulted in surplus liquidity.

However, the inflation hasn't picked up due to subdued demand and under consumption owing to higher unemployment rate, rising taxes, policy implementation lags, undervalued wages for workers which all together has lessened the disposable incomes and propelled lower aggregate demand and thus inflation has grown above 2 percent target.

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