Question

Explain the Federal Reserve’s recent reasoning on interest rates? What is your view on the Fed’s...

Explain the Federal Reserve’s recent reasoning on interest rates? What is your view on the Fed’s decision making?(Wall street journal) 150 words.

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Answer #1

Solution

The outlook of Federal Reserve about the interest rate is to keep at 2% to 2.25%. There is a consensus that the interest rate will be raised one more time this year. This increase of interest rate is third of the year and there has been eight instance of increase of rate from 2015. Donald trump is not happy about this increase. The Federal Reserve wants the inflation to be at 2% because they think this much of inflation is necessary for demand push. Fed rate is higher than the inflation rate for the first time in eight years. The rationale of increasing the interest rate is that economy is doing well and there is a scope for these interest rate hikes. The unemployment rate is 4% and it is not a worrisome situation. Some argues that if unemployment rate is falling then increase in the interest rate is justifiable for preventing the economy from overheating.

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