Monetary Economics

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Student’s Name Instructor’s Name Course Date Monetary Economics 1. a). The committee expects that with its existing and progressive monetary policies, the labor market conditions would remain strong while the economic activity in the country would expand at a moderate pace. There would be no significant long-term risks to the economy. The committee, therefore, decided to leave the funds rate at 1.5 percent. This according to the members’ opinion, would continue rising gradually to around 2% (Federal Reserve, Npag). With regard to inflation, the committee noted that the rate was below the expected rate of 2, this would, however, move up and stabilize around the 2% target in 2018 mainly due to the strong labor market conditions in the country. The committee would also continue with its winding down of the huge amount in holdings it had acquired during the recession period of 2008. It would, therefore, allow the $12 billion of its Treasury securities to mature every month without making a replacement. This would also be the case for the mortgage-backed securities worth $8 billion. With regard to the long-term sustainability of its monetary policies in the economy, the committee noted that it would continue assessing the expected and realized economic conditions while putting into consideration its objective of a 2% inflation and maximum employment. This would guide the size and timing of future adjustments to the fed rate. The assessments would be based on the financial and international development, inflation expectations as well as pleasure, and labor market conditions. Though the committee expected the fed rate to continue rising, it would depend on the

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