The Federal Reserve System has had an eventful spell since the late-2000s recession and it seems that the Fed is still a major force in influencing the shape of the USA economy. An article in the Wall Street Journal by Jon Hilsenrath; Fed Considers More Action Amid New Recovery Doubts bolsters the notion that the Fed is still playing a pivotal role in the country’s economy. The article is both an analysis and a prediction of possible decisions the Federal Reserve will make in response to the slower economic growth and unemployment.
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The Federal Reserve has within its powers the ability to make monetary and fiscal policies as well as legislation that affect the economy; normatively the policies and legislation should help the economy grow. Intervention of the Federal Reserve is deemed necessary when the economic projections are bleak and some intervention is required to boost the economic growth.
However, this vindication of action is based on economic indicators’ results and projection and thus becomes a tough balancing act that could work or fail depending on the accuracy of the analysis of the situation. The Fed’s next meeting scheduled for June 19-20 does not afford the Fed enough time to monitor the situation of unemployment in the country thus unanimity on whether to act or not has been difficult to achieve.
The writer of the article highlights the difficulty in reading unemployment figures especially due to seasonal hiring and statistical adjustment made to the reported figures and how this makes it difficult for the Fed to act based on the results. Also discussed in the article is Operation Twist and its impending end and how to move on from it; either continue with the bond-buying programs or to use other policies especially given the effect of low interest rates on the economy.
It is a dilemma of boosting immediate economic growth versus long-term decrease in interest rates and eventual higher stock prices, increased public spending and more investment. The Fed is divided on the way forward and what the stakeholders and the country have to watch and wait for the Fed’s decisions.
Highlighted in the article are some key aspects of the Fed chief among them its management of monetary and fiscal policy. The Fed is independent from the federal government and thus has no political inclinations and its running is free from political influence especially with its president Ben Bernanke not seeking another term in office.
This fact supports the call for a more independent Fed free from political influence and control e.g. by congress as the Fed stays focused only on the economy of the country despite political changes and this ensures a steady economy despite regime changes.
The crucial roles of the Fed of conducting economic research and using the results to design effective fiscal and monetary policy are the keynote of the article. Results of the Federal Reserve meetings are highly anticipated as they determine a lot in the economy; borrowing and lending rates, inflation and the economic environment that determines economic activity like investment and stock trading.
The Federal Reserve thus largely determines the economic direction of the country; often making tough decisions that are necessary for the stability of the economy. These decisions are usually double-edged e.g. lowering rates is beneficial to those borrowing and less lucrative to those who seek to save and some policies are either long-term or short-term thus favor and disadvantage different people in the economy. Thus far, the Federal Reserve has kept to its main role; to keep the country’s economy stable.
Hilsenrath, Jon. “Fed Considers More Action Amid New Recovery Doubts.” The Wall Street Journal. June 6, 2012. Web. <https://www.wsj.com/articles/SB10001424052702303918204577448802287653684>