Lets understand the Feds Better ( part 2)
Sequel to the blog " alas, the FEDs met again (part 1)
Lets do a quick quick recap, shall we →
The Federal Open Market Committee, or FOMC, is a group of people who make important decisions about money and how it is used in the United States.
They meet a few times each year to talk about how much money there is in the country and how it is being used. They can make changes to the amount of money available and how much it costs to borrow it, which is called the interest rate. They do this to help make sure that there is enough money to go around and that people can afford to buy things they need, like food and clothes.
What have been the recent implications of the FOMC?
The Federal Open Market Committee (FOMC) of the Federal Reserve System has taken a number of actions in recent years to address economic conditions and achieve its policy objectives.
In response to the economic downturn caused by the COVID-19 pandemic, the FOMC significantly lowered the target range for the federal funds rate, which is the interest rate at which banks lend to each other overnight, to near zero. The FOMC also implemented a number of other policy measures, including the purchase of large quantities of government and mortgage-backed securities, to provide liquidity and support financial markets. These actions were aimed at helping to stabilize financial markets, support the flow of credit to households and businesses, and boost economic activity.
As the economy has improved and the public health situation has stabilized, the FOMC has begun to gradually adjust its monetary policy stance. In recent meetings, the committee has conveyed that it plans to keep the federal funds rate at its current low level for an extended period of time, while continuing to assess the economic outlook and the appropriate stance of monetary policy.
The actions of the FOMC have had important implications for the U.S. economy and financial markets, as well as for the global economy. The committee's decisions can affect the value of the U.S. dollar, interest rates, and the availability of credit, which can in turn influence economic activity and financial market conditions.
FOMC stand on inflation in USA
The Federal Open Market Committee (FOMC) is the main policy-making body of the Federal Reserve System, the central banking system of the United States. One of the main goals of the FOMC is to achieve maximum employment and stable prices, or low and stable inflation, for the U.S. economy.
The FOMC has a long-standing inflation target of 2% per year, as measured by the annual change in the personal consumption expenditures (PCE) price index. The PCE price index is a measure of the prices of a basket of goods and services consumed by households. The FOMC uses this target as a guide for setting monetary policy and assessing the overall health of the economy.
In recent years, inflation in the United States has generally been running below the FOMC's 2% target. In response to the economic downturn caused by the COVID-19 pandemic, the FOMC lowered the target range for the federal funds rate, which is the interest rate at which banks lend to each other overnight, to near zero and implemented a number of other policy measures to provide liquidity and support financial markets. These actions were aimed at helping to stabilize financial markets, support the flow of credit to households and businesses, and boost economic activity.
As the economy has improved and the public health situation has stabilized, the FOMC has begun to gradually adjust its monetary policy stance. In recent meetings, the committee has indicated that it plans to keep the federal funds rate at its current low level for an extended period of time, while continuing to assess the economic outlook and the appropriate stance of monetary policy. The FOMC will also closely monitor inflation and will adjust its policy stance as needed to achieve its inflation target over the longer run!