FOMC Statement: “Economic Activity has been expanding at a solid pace,” “Patient” on Policy

FOMC Statement: “Economic Activity has been expanding at a solid pace,” “Patient” on Policy

It is no secret that our economy has seen better days over the past few years. We, as an economy, are recovering from a rather difficult recession that hit us rather hard. We saw unemployment rise, GDP growth slow and even decrease, we saw that people were not spending or consuming much if at all, and we saw powerful businesses fold all over the place. Overall the recent recession was horrible and is something we do not want to go through again, as an economy and as a country. However, the Federal Open Market Committee (FOMC) says that the economy is expanding at a good pace and we as members of this economy have to be patient with the process. What is evident that our country needs is a better employment rate, lower inflation rate, and better control of the value of the dollar. These were all huge components in the last recession and were where almost all the chaos results from.

The FOMC that met in December has explained that our labor market has improved due to the addition of many jobs and a lower national employment rate. In other parts of the nation unemployment did rise, even in the capital. Also, household spending has increased since the recession whereas during the recession household spending dropped to almost rock bottom. The household sector, according to the FOMC, has been recovering but not as fast as business investment which is doing much better since the recession. At the meeting the Committee decided that the two most important items on their agenda was the unemployment rate and price stability.

Our economy cannot and will not flourish if the unemployment is high because that means production and profits will be low therefore hindering growth. The FOMC is planning on keeping an eye on both the real and expected unemployment rates so that if the rate is starting to get too high the government will be able to catch it. In terms of the price stability and monetary policy the government is going to spend a lot of time looking at inflation and what direction it is moving. Inflation, according to the FOMC, will not have negative effects if it rises a little bit because that is expected over time. However, if inflation rises rapidly the government will actually be able to catch it because it will be paying more attention to these numbers.

In conclusion, the FOMC has the right idea in terms of what statistics to watch but as members of the economy we have to be patient. Our economy is not going to grow rapidly for three years and be in a golden age; it is going to take time. The unemployment rate and inflation rate will get better if we keep an eye on them and take action when the rates get too out of hand.

Bobby Indeglia

 

http://www.calculatedriskblog.com/2015_01_01_archive.html
Bill McBride

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2 thoughts on “FOMC Statement: “Economic Activity has been expanding at a solid pace,” “Patient” on Policy

  1. anthonycritelli

    I agree completely with you here Bob. The unemployment rate has a huge impact on recovery and if it is not moniored and gets too high progress and rebuilding can be severely hindered. Inflation and GDP growth are also elements that need to be watched, and hopfully they all o in the right direction and growth continues.

    Reply
  2. Victor Matheson

    Figuring out when to stop concentrating on lower unemployment and start concentrating on keeping inflation in check is a tricky tightrope to walk. The next year will be interesting for the Fed.

    Reply

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