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Trends in Interest Rates

lic and private sector in its form, functions and operations. Its primary mandate is public policy, which goes back to the fact that it was created by an act of Congress rather than by the private sector. In this way, the Fed can be considered an instrument of the government that utilizes the language and mechanisms of the private sector (Goodfriend, 1994, p. 572).

The Fed held interest rates steady for most of 1997 and 1998 during which time the economy moved forward at a slow pace. Inflation was kept in check, the federal deficit declined, and unemployment was at near-record lows throughout the country. Despite this, there was little upward pressure on wages and, in general, consumers have seen some slight interest in their purchasing power. By late 1998, there was an increase in wages in some service industries and among computer and technical professionals; this has led to some increase in service prices.

Consumer spending as measured through retail sales generally increased throughout the country during 1997 and 1998 with sales of durable goods (such as home furnishings and appliances) posting steady increases. These increases indicated that the economy continued to experience growth, but at a slow pace. This growth was also reflected in manufacturing where gains were seen in the midwest and east. Construction materials and related goods were particularly strong while electronic goods have suffered somewhat in 1998. This decline in electronic goods was thought to be related to the crisis in Asia which dampened demand for American goods in the short-term (Kraus, 1998, p. 20).

The following charts illustrate the discount and federal funds rates for 1997 through mid-1999 ("Discount Rate," 1999, pp. 43, 44; "Federal Funds," 1999, pp. 1, 2):

Modest growth is key to the long-term health of the American economy (Belton & Cebula, 1995, p. 9). If the economy grows too rapidly, there is the risk of inflation, which has ...

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Trends in Interest Rates. (1969, December 31). In LotsofEssays.com. Retrieved 01:53, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1696302.html