Working with Federal Reserves Publications Essay

Working with Federal Reserves Publications - Essay Example In the past Central Bankers have traditionally been close-mouthed and the Federal Reserve was often reluctant to state publicly what its current policy directive is; what its idea about future monetary policy actions including its predictions in relation to general economic conditions or interest rates (Ehrmann et al 2007). Hence periodic or regular publications may provide some detailed analysis of monetary policies for the preceding moths or years but does not divulge any information details regarding current of future polices. The conventional or common practice of the Federal Reserve in keeping quiet about present and future monetary policies have change recently becoming more transparent such that after meetings the Federal Open Market Committee (FOMC) publicly relates monetary policy decisions and central bank forecasts, which also includes justifications for any changes that were or are made (Ehrmann et al 2007). The justifications include considerations taken that resulted to the decision over the changes done on the said monetary policies. The trend of the economy and financial markets generally rely on the monetary policy standpoint and balance-of-risks appraisal of the Federal Reserves or Central Bank’s public statements in connection to inflation and other forms of economic circumstances. The transparency adopted by the Federal reserve lessens market uncertainty with respect to any future monetary policy. However, the Federal Reserve has an option to change its perception and views after making a public announcement regarding its policies. But even with the data or information made available on prior and future monetary policies, a precise determination of the effects of such policies on the general economy and its financial markets can be hard to identify mainly due to other economic factors that can change overtime. 2. Explain the Federal Reserve’s current view about inflation Inflation usually occurs when there is an excess demand, when prices rise when total spending made by consumers, business firms and the government go beyond the value of the total amount produced within a given economy (Roberts 2006). In relation to this, changes in monetary policies as well as fiscal policies contribute greatly to the level of demand which is affected by government purchases, total consumption and investments made (Roberts 2006). However, this has no actual connection to the price level that is similar to the actual price of a single commodity; especially if all other changeable factors are constant like income (wages) and the prices of other goods. The collective price level normally indicates that all other prices are shifting as well. Therefore, incomes usually rise and fall with the level of prices because income is obtained from the price and quantity of goods sold (Roberts 2006). Issues regarding shifts or changes in the economy are quite complicated sine in real terms output in answer to demand cannot increase bey ond the full level of employment which triggers an increase in spending that can merely be attained at higher prices. This can be illustrated in the Philips curve where total demand can be slimmed down or increased in tandem with supply in order to attain full employment output with supply in order to attain full employment output with stable prices. Reality wise, demand is affected by difference in government spending and taxation (fiscal policy) or by the variation s in monetary factors that affects business investment spending. As a whole, it is difficult for the Federal Reser