The Federal Reserve & Monetary Policies

A comparison of the Bank of Japan and the Federal Reserve in The Economist ("The rewards of independence: central banks: America v. Japan," 1992, 19-21) notes first that studies have shown that when central banks are independent of political influence, they tend to deliver lower rates of inflation. They accomplish this without simply costing jobs, for countries with independent central banks do not, on average, have higher unemployment rates than others, with many having less. Under such systems, workers and employers adjust their wage-setting more readily to the climate of tight money because they believe that the policymakers have a commitment to low inflation. On the other hand, when politicians have a hand in setting monetary policy, they are always tempted to engineer a boom ahead of an election, and thus anti-inflation pledges lack credibility. Workers thus continue to demand high pay raises while bosses continue to concede them. The author concludes: "To make monetary policy credible, and hence more effective, it must be put in the hands of an in

. . .
out inflation, the recession, and related economic matters, including the growing deficit and tensions created by monetary scandals which have strained the system more than usual. Federal Reserve Chairman Alan Greenspan is expected to do something that will help resolve the economic problems facing the country, but many fear his actions as something that may harm the economic recovery or threaten the stock market. There is thus considerable argument over what action he should take to have the desired result. Forecasting the rate of unemployment is one of the predictions made by the Federal Reserve to help in deciding interest rates and other policy matters. The Federal Reserve often works with other central banks to accomplish a change in policy on a large-scale basis. The Wall Street Journal reported in 1992 that the Fed, along with thirteen other central banks, had intervened repeatedly in world currency markets to support the sagging dollar. Some saw this effort as an ill-timed failure, whoever, feeling that it would invite further speculative attempts over the coming weeks to drive U.S. lower ("Central Banks Intervene to Aid Dollar, but Effort Doesn't Give It a Strong Boost," 1992, 5). Lower interest rates have had a be
. . .

Some common words found in the essay are:
Federal Reserve, America Japan, Reserve System, Strong Boost, Street Journal, C1 C8, federal reserve, Alan Greenspan, Bank York, Committee FOMC, C1 C20, central banks, wall street, wall street journal, street journal, lower rates, america japan 1992, 1994 february, reserve system, rewards independence, independence central banks, independence central, america japan, banks america japan, rewards independence central,
Approximate Word count = 1743
Approximate Pages = 7 (250 words per page)

More Essays on The Federal Reserve & Monetary Policies