http://www.washingtonpost.com/business/economy/federal-reserve-considers-explicit-pledge-low-rates-if-inflation-stays-down/2013/09/23/9207e1a6-220e-11e3-966c-9c4293c47ebe_story.html
The Federal Reserve is pledging to keep interest rates low as long as the economy and inflation rates don't go up. They do not want to stop a recovery early. They want to give it a chance. The magic number for them is 2.5%. That is what they believe will signal a robust and improving economy.
I think that it is a very good thing that they are trying to make sure that they wont stop the economic recovery. They messed up a couple of times with their attempts to fix problems. However, I don't think that they should publicly be making promises. They did that once already during this recovery and it caused a downturn because the failed to come through with what they said they would do. Another downturn is exactly what the economy does not need.
The fed needs to stop attempting to control the economy. It is something that cannot really be controlled. By that same token, people need to stop reacting to Federal Reserve decisions. Due to the fact that they themselves have control over the economy, they need to stop freaking out over little things. The federal reserves actions have in reality very little to do with actual concrete business.
You said that "the fed needs to stop attempting to control the economy," but isn't that what the Fed was created for? I think it's incorrect to say that the economy can't be controlled. There have been countries in world history who have had their economies completely controlled by some government entity. Not saying this is good, but just saying this is possible. Also, the actions of the Fed have a huge impact on the stock market and the amount of money that is in circulation because of the regulation of interest rates. Both of these things greatly affect the economy, and in turn, "concrete business."
ReplyDeleteI agree with you dj illy willy! This is a good article and I hope inflation stays down!
ReplyDeleteAlthough I do think this concept sounds decent, I would have to agree that it is not necessarily good to make promises. If something happens that results in anything less than what has been advertised, the public opinion will continue to decline, thus leading to further issues.
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