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Questioning Federal Rate Fluctuation in the USA

440 words 2 page(s)

According to Appelbaum in an article written for the New York Times, the Federal Reserve in 2016 expected that the growth in the US economy would be slow (2018). This is because of a weak global growth that had for a long time impeded faster development in the nation’s industries. In this manner, Yellen claimed that the Fed could not raise its benchmark rate due to a weak global system. She stated that a strengthening of the dollar against other currencies would lead to an adverse ripple effect where the nation’s economy would slump as demand for American products would drop (Appelbaum, 2018).

However, the Federal Reserve of Kansas City, Esther. L. George argued for an increase in the Fed rate by one percentage point over the course of one year (Appelbaum, 2018). Yellen’s critics, as in the case of Ms George, stated that the Fed would be forced to increase the Fed rate by one percentage point as the market would force the agency to do so. However, as Yellen illustrated, this reality would take a long while as wage rates remained low amidst other employment issues such as an increase in the number of part-time workers seeking full-time employment (FRB, 2016).

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In an article termed Dc hold’em, written in relation to the Federal Reserve, the authors claimed that the Federal Reserve expected to increase the Fed rate by one percentage point over the course of 2016 (The Economist, 2016). However, with issues such as increasing spread on corporate bonds, the nation’s exchange bodies such as the S&P 500 understood that the nation was facing economic woes (The Economist, 2016).

In line with a disappointing growth in the Chinese economy, the markets adjusted their confidence in the growth projections, evidencing a deviation from the projections of the government agency. However, while the Federal Reserve adjusted its projections, claiming that it expected two rate growths within the year, the markets adjusted their rates downwards, stating that the expectation was that the rate would not grow in 2016 (Holodny, 2016). Nonetheless, the nation’s economy seems to have rebounded, despite sluggishly, illustrating a possibility for increased growth over the year, despite low growth in the first quarter of 2016.

    References
  • Appelbaum, B. (2018, January 19). Fed Slows Down on Plans to Pursue Interest Rate Increases. Retrieved from https://www.nytimes.com/2016/03/17/business/economy/fed-interest- rates-meeting.html
  • FRB. (2016). Https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20160921.htm. Retrieved from https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20160921.htm
  • Holodny, E. (2016, December 14). The Fed upgrades its growth and inflation forecasts. Retrieved from https://www.businessinsider.com/fed-summary-of-economic-projections- december-2016-2016-12?IR=T
  • The Economist. (2016, April 28). DC hold’em. Retrieved from https://www.economist.com/finance-and-economics/2016/04/28/dc-holdem