Federal Reserve Policy Minutes of the Federal Open Market Committee September 16th and 17th, 2015

FEDERAL RESERVE POLICY 1

FederalReserve Policy: Minutes of the Federal Open Market CommitteeSeptember 16th and 17th, 2015

XuelianKang

GeorgiaState University

Federal Reserve Policy: Minutes of the Federal Open Market CommitteeSeptember 16th and 17th, 2015

The Federal OpenMarket Committee’s joint meeting and the Board of Governors washeld in the Board of Governors offices in Washington D.C. at theFederal Reserve System. The meeting was held on 16th and17th of September, 2015 at 1.00 p.m. and 8.30 a.m.respectively. From the minutes drawn a week later from thesemeetings, the paper therefore, aims at giving answers in regard toquestions about the Federal Reserve Policy to the C.E.O of a largecorporation.

“The FOMC viewed the September projections uncertainty from thereal GDP growth, the inflation, and the employment rate to be similaras similar as the average over the past 20 years. The real GDP andrisks to the forecast and inflation were viewed to be leaning on thedownside, which reflected the FOMC’s assessment that neither fiscalnor monetary policy was positioned well to assist the economywithstand visible adverse shock. In consistency with the downsiderisk to the aggregated demand and further adjustment to the FOMC’sassumptions of the supply side, the risks were seen to be an outlookfor the rate of unemployment tilting on the upside” (FOMC, 2015).

Based on the above paragraph on the FOMC minutes, the Federal OpenMarket Committee took action in regard to the escalating level of thefederal funds rate. Prior to that, concerns were raised about boththe global economic growth and failure in the financial markets,which led to a greater uncertainty among the market participantsfollowing the United States normalization of the monetary policystance, which ensures the decisions made by FOMC are quick anddecisive. The FOMC take action by looking at its economic forecastingafter the drop of the GDP (Leightner, 2015). This is when they sloweddown the economic projection over the next few years to come.Secondly, the assumptions were trimmed following the rates ofincrease over the potential output and in the productivity over. TheFOMC also used the gains from real income and employment to providesupport for higher spending. Finally, the credit performance fromhousehold and delinquency rates was used to lower the auto loans. Itmeant that the IS-LM Model studies prices on the short run. It iswhen prices are sticky or fixed with no inflation put intoconsideration. Additionally, it means IS-LM Model focuses on a higherinflation rate in the market (Wood, 2015). The FOMC made this choicefollowing a projection that the consumer price inflation was raisingat an alarming rate. The raising inflation ensured the policies werepicked because of the economy at the time was expanding at a moderatepace. Although the net exports remained soft, the policies werechosen because it was broadly-based.

Fig 2: ThePolicy Firming appropriate pace: target range level for the fed fundrate.

From theminutes, the use of “monetary policy normalization,” wasunfamiliar. Further research showed its significance as far aseconomic situation is concerned. According to Striner (2015),monetary policy normalization means the steps the FOMC (Federal OpenMarket Committee) will take to anonymously remove substantialmonetary accommodation. Here, it is when it is offered to the generaleconomy during and following the aftermath of the economic crisisthat had started in 2007. I understood it specifically means stepstaken towards raising federal funds rate and many other short-termfunds rate to a more normal rate, and thus reduce securities for theFederal Reserves (Derven et al., 2014). In conclusion, the minutesfrom the FOMC drew attention about the Federal Reserve Rates, itssignificance as far as actions towards them are concerned. Inaddition, economic forecast also contributed to several actions,which include lowering economic projection towards potential outputsrates and economic inflation.

1.Identification

Points

5

4

3

2

1

Grading Scale

Excellent

Good

Average

Fair

Poor

Criteria

Complete, appropriate, no change

Complete but needs minor revision in next cycle

Incomplete or lacks clarity

Missing informations, inaccuracies

Do not attempt to or fail to identify

Identification

Appropriately identifies the problem

Describe concepts and idea

Clearly explains assumption, background, and related theory

Cites textbook and appropriately linked directly to book

Includes essential information on what the concepts and ideas are for

Comment

Again, you’re going to need to explain the importance of the economic indicators to the FOMC’s policy decisions. Cite the textbook and use the IS-LM model to illustrate these differences.

2.Analytic

Points

5

4

3

2

1

Grading Scale

Excellent

Good

Average

Fair

Poor

Criteria

Complete, appropriate, no change

Complete but needs minor revision in next cycle

Incomplete or lacks clarity

Missing informations, inaccuracies

Do not attempt to or fail to identify

Analytic

Applies economic concepts (and related formulae) correctly to the given questions

Understands and solving the problem

Makes and analyzes logical argument

Conclusions are qualified as the best available evidence within the context.

Comment

Missing IS-LM

3.Application and Critical Judgment

Points

5

4

3

2

1

Grading Scale

Excellent

Good

Average

Fair

Poor

Criteria

Complete, appropriate, no change

Complete but needs minor revision in next cycle

Incomplete or lacks clarity

Missing informations, inaccuracies

Do not attempt to or fail to identify

Application and Critical Judgment

Analyzes ideas and able to interpret the result from analytical solution

Sees practical implications of abstract ideas

Analyzes real-world policies and processes

Clearly develops implications and considers ambiguity

Formulates pertinent comments

Includes discussion of validity of content presented in textbook and opinions

Critical thinking used in clearly stating own opinion and that of others carefully cited.

Comment

See comments throughout.

4.Communication and Structural organization

Points

5

4

3

2

1

Grading Scale

Excellent

Good

Average

Fair

Poor

Criteria

Complete, appropriate, no change

Complete but needs minor revision in next cycle

Incomplete or lacks clarity

Missing informations, inaccuracies

Do not attempt to or fail to identify

Communication

and

Structural organization

Language clearly and effectively communicates ideas.

Organization is clear.

Assignment clearly has introduction, body, discussion, conclusion and reference section, if applicable.

Grammar, syntax and other errors are minimal.

Style is appropriate.

Comment

Label each part of your answer.

References

Derven, M., Gundling, E., &amp Leri, P. (2014). Leveragingdiversity &amp inclusion for a global economy. Alexandria, VA:American Society for Training &amp Development.

FOMC (2015). Minutes of the Federal Open Market Committee.Washington D.C: United States Retrieved fromhttp://www.federalreserve.gov/monetarypolicy/files/fomcminutes20150917.pdf

Leightner, J. E. (2015). The limits of fiscal, monetary, and tradepolicies: International comparisons and solutions. Harlow,England: Prentice Hall Financial Times

Striner, R. (2015). How America can spend its way back togreatness: A guide to monetary reform. Santa Barbara: Praeger.

Wood, J. H. (2015). Central banking in a democracy: The FederalReserve and its alternatives. Cheltenham: Edward Elgar Pub