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EconNews Online is South-Western College Publishing's service to provide summaries of the latest economics news stories. Review the brief summaries and, for stories of interest, select the full summary. |
| MONETARY POLICY | |
| Title | Brief Summary |
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Will the Fed Raise Rates |
Given the recent job
report indicating that U.S. payrolls grew in September, historical precedent
would suggest that the Fed might return to a monetary policy protecting
against inflation. Many economists are not so sure, and say that the job
data could position the Fed to hold off on interest rates even longer. (Updated October 7, 2003) |
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How Big the Tax Cut? |
President Bush has requested
a tax cut of $726 billion over the next ten years. In this highly partisan
issue, it appears that the actual tax cut is more likely to be in the area
of $350 billion. With an election year nearing, the political climate for
a tax cut is favorable, but the final size of the cut and associated reduction
in spending is still up for debate. The areas of reducing taxes on dividends
and capital gains, a high priority for President Bush, have been highly
contested. (Updated June 2, 2003) |
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Inciting Inflation |
Japan's central bank
has kept short-term interest rates at zero for almost four years, without
initiating the hoped-for stimulus. In reaction to falling prices, climbing
budget deficits, a declining yen and a tightening of business and consumer
spending, there is a push to try inflation. (Updated April 4, 2003) |
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On a Par |
During this past year,
the dollar has depreciated about 12 percent relative to the euro and many
analysts predict the dollar will fall further, perhaps to $1.10, by the
end of 2003. (Updated January 2, 2003) |
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Big Bank Bailout |
Many Japanese officials
feared that the banking industry might collapse and throw the economy into
turmoil. To prevent this potential disaster, the Bank of Japan announced
a plan to purchase stocks from banks, a solution that will require legislative
change. (Updated October 10, 2002) |
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The Negative Side of Interest Rates |
Interest rates in Japan
are very close to zero. Yet, with continuing deflation and the threat of
a banking crisis the Central Bank of Japan is considering lowering interest
rates still further, to below zero. (Updated September 1, 2002) |
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Open, Says the Fed |
Commercial banks can
occasionally find themselves short of reserves, so the Fed is proposing
a change in the way that it loans reserves to member banks - to allow greater
access to loans in exchange for higher interest charges. (Updated June 1, 2002) |
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Fed Says |
The FOMC voted to hold
interest rates at present levels at their March meeting, noting a recovery
is well underway and further interest rate cuts are unlikely. (Updated May 1, 2002) |
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The value of Argentina's
national currency, the peso, plummeted,throwing the country into a deeper
financial crisis. Argentine President Eduardo Duhalde is losing popular
support and unless he can stop the peso's fall, his ability to govern is
questionable. (Updated May 1, 2002) |
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Argentina is hoping
that a devaluation of the peso will promote export growth and provide sufficient
stimulus to end Argentina's four-year recession. Analysts believe that even
if supporting measures are adopted, improvements in the Argentine economy
will take years, not months to accomplish. (Updated March 20, 2002) |
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In the face of a faltering
economy with surging joblessness and slumping consumer confidence, the Federal
Reserve cut the federal funds rate by one-half percent in an effort to inject
some strength into the economy. (Updated December 1, 2001) |
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The Fed cut its benchmark
federal funds interest rate from 3 percent to 2.5 percent, the lowest level
in 39 years. Interest rate cuts are supposed to induce business and consumers
to increase spending; but business borrowing has virtually ceased and consumer-credit
growth has slowed sharply. (Updated November 1, 2001) |
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After years of assuming
that a strong dollar was good for the U.S. economy, many economists are
calling for the Bush Administration to reexamine its policy, arguing that
the current strength of the dollar is hurting exporters. (Updated September 1, 2001) |
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The Federal Reserve
has cut interest rates by a total of five and three-quarter points since
the start of 2001, but the economy has not responded to these rate cuts,
and Fed officials to wonder if additional rate cuts are needed. (Updated August 1, 2001) |
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A Fed governor with
a reputation of being extremely rigid when it comes to fighting inflation,
has been engaged in a debate with Alan Greenspan over monetary policy and
its relation to economic growth and inflation. (Updated July 1, 2001) |
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The economic expansion
continued for record lengths, but over the past year the Fed tried to slow
the economy's growth by enacting a number of interest rate hikes, and economic
growth fell sharply and suddenly. (Updated May 1, 2001) |
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Japan's policy makers
are struggling to revive a stagnant economy¾consumer and business spending
has decreased in recent months because of a lack of confidence in their
economic future. As a consequence, prices have fallen and so has the value
of assets. (Updated May 1, 2001) |
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Fears that the U.S. economy
is slowing bring fears that Canada's economy will follow. These worries
caused the Canadian central bank to reduce its short-term interest rates
by one-half percent to try to stimulate domestic demand. (Updated April 1, 2001) |
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Alan Greenspan is believed
to single-handedly control U.S. monetary policy and thereby the U.S. economy.
The task of managing the U.S. economy depends importantly on the underlying
volatility of output, which decreased starting with the first quarter of
1984, before Greenspan's first appointment to the Fed in 1987. (Updated February 1, 2001) |
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There is a mounting body
of evidence that the economy is slowing. Stephen Roach, chief economist
at Morgan Stanley Dean Witter, argues that the economy has stalled and that
another shock, perhaps in the form of another decline in the stock market,
could bring a recession both here and abroad. (Updated January 1, 2001) |
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Over the past year, a
soft landing had seemed to be the most probable outcome following predictable
declines in employment growth and the stock market. But events in recent
weeks indicate that the "landing" may not be so soft. (Updated December 1, 2000) |
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A strong dollar was supposed
to be good for the American economy, and the inflow of foreign capital into
the U.S. has supported productivity improvements and increased profitability
of American firms. Economists are now having second thoughts about these
benefits. (Updated December 1, 2000) |
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Interest rates in Japan
have been almost zero since February 1999, a policy adopted as an emergency
measure to assist Japan's ailing economy. It was expected to only be a temporary
measure, but policymakers at Japan's central bank have just voted to keep
interest rates at their current level. (Updated August 1, 2000) |
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Economic data is being
carefully monitored for signs that the Federal Reserve's six interest rate
hikes over the last year have slowed the economy. Early signs of a slowdown
were reports that car and home sales have dipped, construction spending
is off and manufacturing output decreased. (Updated July 1, 2000) |
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The Fed may change its
policy of gradually raising interest rates in an effort to reign in the
economy. The emerging signs of inflation suggest that this gentle nudging
is not working and a more aggressive approach is needed. (Updated June 1, 2000) |
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In a continued effort
to slow the economy, in May the Fed raised short-term interest rates by
one-half percent. Looking ahead to its June meeting, the Fed's monetary
policy committee said the economy's "risks are weighted mainly toward conditions
that may generate heightened inflation pressures in the foreseeable future." (Updated June 1, 2000) |
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A week after the Federal
Reserve Bank raised U. S. interest rates, the European Central Bank, the
Bank of England and South Korea all raised their interest rates as a result
of central banks becoming worried about inflationary pressures in their
economies. (Updated March 1, 2000) |
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With economic growth
surging at nearly 6 percent in the second half of 1999, Federal Reserve
policymakers raised rates for the fourth time in the last 6 months to cool
off the economy and prevent inflation. Consumers and businesses will face
higher borrowing costs for everything ranging from credit card purchases
to mortgages. (Updated March 1, 2000) |
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The fear of Y2K mishaps
resulted in billions of dollars being spent on computer programming fixes.
Many people had to work on New Year's Eve as a precaution. People stocked
up on water, food, gasoline, but apparently not on cash. (Updated February 1, 2000) |
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Responding to the significant decline
in the unemployment rate, the Fed raised short-term interest rates by one-quarter
percent to 5.5 percent. The Fed expects that the increase will ease economic
growth and reduce the demand for labor, as reductions in sales will cause
businesses to cut production. (Updated January 1, 2000) |
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The impact of an increase in interest
rates on aggregate consumption is negative¾consumers generally reduce their
purchases of durable goods, like automobiles and homes that are financed
over time. For more and more individuals, rising interest rates can affect
consumption through change in wealth. (Updated December 1, 1999) |
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At the September FOMC meeting, the
Fed decided to leave interest rates unchanged and most investors probably
heaved a sigh of relief. However, looking at the yield on United States
Treasuries since that time, it is obvious that yields have been increasing.
(Updated November 1, 1999) |
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The Fed's recent decision to raise
short-term interest rates will have widespread impact on the U. S. economy.
Banks will likely increase their prime lending rates, which will change
home equity, credit-card and small business loan rates that are tied to
the prime rate…. (Updated August 1, 1999) |
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For many months the question of
whether the Fed was going to raise interest rates has been in the news.
The economy has been growing at a rate that in the past would have caused
inflation to accelerate, but inflation reports showed only minor changes. (Updated July 1, 1999) |
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After raising interest rates three
times since September, the Federal Reserve decided at this month's meeting
to leave interest rates unchanged. (Updated January 1, 1999) |
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When the Federal Reserve holds its
monthly meeting to determine whether current economic conditions require
a revision of the Fed's monetary policy, there will no doubt be debate over
whether the Fed should cut interest rates again or simply hold the line. (Updated December 1, 1998) |
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In a surprise move,
the Federal Reserve--acting outside of one of its regularly scheduled policy
sessions--cut interest rates by one-quarter of one percent. The Fed's action
was in response to growling concern that the unsettled conditions in financial
markets will restrain aggregate demand in the future. (Updated November 11, 1998) |
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After months of speculating
whether the Federal Reserve was going to raise interest rates, the global
financial crisis and its theorized effect on U.S. growth, caused the Fed
in rapid sequence to first consider, and then implement, a decrease in the
Federal funds rate by one-quarter of one percent. (Updated October 15, 1998) |
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The Fed's Open Market
Committee met and again held interest rates in check, but this time the
motivation for their action was to try to balance the needs of a domestic
economy displaying strength and an increasingly fragile global financial
market. (Updated September 1, 1998) |
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To Raise or Not
|
When is the inflation
coming? The economy is growing at a rate that in the past would have caused
much anxiety on the part of the Federal Reserve. Inflationary pressures
are building and many question the Fed's decision to hold interest rates
steady. (Updated May 22, 1998) |
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Money Matters
|
The now muddied relationship
between money and growth has caused the Fed to announce their monetary objectives
in benchmark ranges rather than as a specific target. (Updated May 19, 1998) |
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Most economists would
sign up to the statement that all economic expansions must end. The question
is when. The average economic expansion in the post World War II era lasts
about 54 months. Our current expansion, which began in 1991, is now 78 months
old. Although this expansion is still not near the record of 106 months
set in 1961-69, it has caused some to argue that recessions may be a thing
of the past. (Updated January 15, 1998) |
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If we were to grade
our current macroeconomic performance, the grade would have to be an "A."
Inflation is low, the unemployment rate is close to a 25 year low, profits
are rising, and the stock market has experienced the longest bull market
on record. This raises the question as to whether current macroeconomic
theory with its assumed underlying relationships between unemployment, growth,
and inflation are still reliable or even valid. (Updated January 15, 1998) |
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