Board of Governors’ Policy Actions
The recent policy actions by the Fed’s board of governors have allowed the economic activities within the U.S. to grow at a balanced pace while allowing the labor market to become stronger. It has set the interest rate to around two percent irrespective of the transitory influences realized from the recent movements in energy prices. The board has further policy accommodation removal to ensure that the present and future economic conditions remain strong. It has increased the federal funds rate target twice leading the level to be at 2-1/4 to 2-1/2 percent. With the softer international financial and econom ic situations during the end of 2018 and soft pressures from inflation, the board has embarked on considering future federal funds rate adjustments that might be ideal for supporting price stability and maximum employment (Federal Reserve, 2019) . The actions have supported positive economic growth.
Recent U.S. Economy’s Performance
Based on the opinion of the Federal Reserve, the economy of the U.S. has realized good performance recently. For instance, the labor market is stronger since middle 2018. Growth in payroll employment is stronger at an average of 224,000 monthly starting June 2018. The rate of employment has remained unchanged during the period even though participation of the labor force has risen irrespective of the continuing downward effect of the aging population. Wage rage has also gone up (Federal Reserve, 2019) . Furthermore, consumer price inflation has gone down while the consumer energy prices have led to restrains in that the inflation does not consider energy and food items, which have historically indicated overall inflation better.
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When it comes to economic growth, the existing indicators reveal that the real GDP (gross domestic product) rose in a stable and balanced manner during the second half of 2018 while it rose by around three percent during the entire year. This depicted a notable rise compared to the pace of growth witnessed in the recent years (New York Fed, 2019) . The spending of consumers has grown strongly mostly due to the influences of past increase in wealth of households, increased job gains, and a rise in disposable income because of the Jobs Act and Tax Cuts. However, spending seemed to decline by the end of 2018. In the event of business investment, it also realized growth despite slowing somehow (Tankersley, 2019) . Nonetheless, the housing market reduced in 2018 due to the effect of increased interest rates in the mortgage market and higher labor costs.
For the financial stability of the U.S., it seems significantly more resilient as opposed to the prior decade prior to the financial crisis. Pressures affiliated with valuations of assets have reduced when compared to July 2010, especially in the corporate bond, equity, as well as leveraged loan markets (New York Fed, 2019) . In addition, in the event of international developments, economic growth in foreign markets went down considerably in 2018 despite realizing growth in 2017. Aggregate growth in developed overseas economies slowed significantly, particularly in Europe while various economies in Latin America showed under performance. The economic activity of the U.S. in China declined tremendously during 2018’s second half. The pressures from inflation in key advanced foreign nations remained retrained leading central banks to deploy accommodative monetary policies (Federal Reserve, 2019) . Overall, the U.S. seems to have realized growth domestically despite realizing deteriorating growth in foreign markets.
Federal Reserve’s Current Monetary Policy
The present monetary policy by the Federal Reserve is the interest rate policy. With the strengthening of economic activity and the labor market at a strong rate, the Federal Reserve raised the federal funds rate’s target range gradually during 2018’s second half. It opted to increase the federal funds rate during September as well as in December leading the rate to arrive at the present range of between 2-1/4 and 2-1/2 percent (Federal Reserve, 2019) . In the event I was the monetary decision maker, the thing that I would have done differently would be to assess the global financial and economic developments while determining their effects toward the growth of the economy. I would continue looking for avenues of growing economic activity and making the labor markets strong while ensuring that the inf lation rate remains around the two percent range. In this manner, it would be possible to determine the ideal adjustments required for the future to ensure positive outcomes within the economy.
Federal Reserve Interference with the Economy
If the economy were not functioning well, I would agree with the actions by the Federal Reserve to intervene. For instance, in when inflation rises, money value declines while the Federal Reserve addresses the issue through raising interest rates. Furthermore, when the economy realizes declined growth in the labor market while the economy remains stagnant, the Fed responds by reducing interest rates to foster economic growth (Tankersley, 2019) . In this vein, it is evident that the Fed is essential in making sure that the economy continues functioning properly.
Effect of Federal Reserve’s Monetary Policy on Financial Markets and Institutions
The present monetary policy by the Federal Reserve has been influencing financial markets and institutions in various ways. It has led to easing of the financial pressures affiliated with valuation of assets, especially in area of corporate bonds, equity, as well as leveraged loan markets. Moreover, it has led to historical rise of the liquidity ratios and regulatory capital of major financial institutions, such as big banks. The risks that the financial system faces have declined considerable whereas households are currently borrowing more (Tankersley, 2019) . In this perspective, it is evident that the monetary policy by the Federal Reserve has impacted financial markets and institutions positively via creating a favorable operating environment.
References
Federal Reserve. (2019). Monetary policy report. Retrieved from https://www.federalreserve.gov/monetarypolicy/files/20190222_mprfullreport.pdf
New York Fed. (2019). U.S. economy in a snapshot. Retrieved from https://www.newyorkfed.org/research/snapshot
Tankersley, J. (2019). Fed, dimming its economic outlook, predicts no rate increases this year. Retrieved from https://www.nytimes.com/2019/03/20/us/politics/fed-rates.html
