Question

Describe your thoughts on how well the Fed is doing in carrying out Monetary Policy.

Answer 1

Fed has been mandated to achieve dual objectives of price stability and full employment. US economy unemployment rate is below the 4 % which is considered as full employment. Now economy has expanded fully and likely to move toward the inflationary pressures. Further rise in aggregate demand will invariably lead to rise in price level or price stability might severely threatened in near future. Therefore, tight monetary policy is right course of action as of now.

Recently, Fed has increased interest rate which is most rational and appropriate response to present economic results unfolding in US economy. Even in past, Fed has proactively fought against the recession and now when US economy has almost recouped from low, it is most desirable to follow tight monetary policy.

To sum up, Fed is doing its job rationally, appropriately and proactively .