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Showing posts with the label Board of Governors of the Federal Reserve System

Powell's October 6th Forecast by Christopher Moreira, Intern, American University

On October 6, 2020, Jerome H. Powell, Chair of the Board of Governors of the Federal Reserve System reviewed America’s economic status amidst the COVID-19 pandemic. Mr. Powell began his analysis at the beginning of 2020, before the pandemic hit. He then touched on the recession and the nascent recovery that must ensue. Mr. Powell closed with a look at what lies ahead on the road to normalcy. The speech was full of numbers and statistics that, to the casual observer wouldn’t fully explain what this means for the country. But, I can say with a fair amount of certainty that Chair Powell is wary of what's to come for our nation, which, before the COVID-19 pandemic was experiencing new highs in job creation and the stock market. Nevertheless, Chair Powell remains optimistic that the country will fully recover and return to what it once was.In terms of the pre-covid economy, Chair Powell stated that: “The U.S. economy was in its 128th month of expansion—the longest in our recorded histo…

Can monetary policy really benefit minority groups in the U.S.? Chenyue Zhu, Impact Investing Intern, Georgetown University

Facing the global challenge of the COVID-19 pandemic and the declining stock market, the Federal Reserve made a bold move to reduce the fed funds rate to zero, trying to boost the economy as a whole.

However, it is uncertain whether minority groups will benefit from this policy. According to a report by the Fed, significant gaps exist between races and ethnicities in terms of interest rate on mortgages, and these differences vary geographically by State.

The government usually makes up those gaps through mortgage lending programs designed specifically for the disadvantaged. However, the country shows no sign of putting forward any targeted monetary policy corresponding to the changing interest rate.

Thus, people suspect that the current monetary policy will leave minority groups behind. In fact, according to Brookings Institution, Black businesses have long been undervalued, and their potential has yet to be developed.

To reverse the declining market economy, the U.S. government shou…

The FedNow℠ Service: The Fed's Blockchain?

The Federal Reserve Board announced that the Federal Reserve Banks will develop a new round-the-clock real-time payment and settlement service, called the FedNow℠ Service, to support faster payments in the United States.

This is a direct response to the threat posed by digital currencies and blockchain. According to one Fed official, "Last summer, the U.S. Treasury recommended that 'the Federal Reserve move quickly to facilitate a faster retail payments system, such as through the development of a real-time settlement service, that would also allow for more efficient and ubiquitous access to innovative payment capabilities.'” Sounds like blockchain to us, thus, we expect this new system to be blockchain enabled. (For more on blockchain, see: What is Bitcoin? How does it relate to blockchain? Henry Zhang, Creative Investment Research Impact Investing Intern. University of Toronto.  Online at: https://creativeinvest.com/crypto/bitcoinfaq.html)

As we noted in our paper &quo…

Why the Fed is wrong about Libra

The Federal Reserve Act (FRA) requires the Chairman of the Federal Reserve System to testify before the House Financial Services Committee and the Senate Banking Committee twice a year, in February and July, on how the Board handles monetary policy and its observations on economic developments.

In keeping with that requirement, the current Chairman of the Federal Reserve, Jerome Powell, testified before the House on July 10th. He indicated as follows:

Economic activity increased at a solid pace in the first part of 2019. The labor market has continued to strengthen: unemployment fell from 3.9% (Dec) to 3.6% (May), wage gains remained moderate. Inflation has been running below the Federal Open Market Committee’s (FOMC) longer- run objective of 2 percent. In June, the FOMC judged that current and prospective economic conditions called for maintaining the target range for the federal funds rate at 2 1⁄4 to 2 1⁄2 percent. Inflation: Consumer Price Index = 1.5 (May).Economic Growth: 1st qt…

Monetary Policy and the State of the Economy

Probability of a Fed Rate Hike in March, 2018 is 92.3% by Hongcheng Chen, Creative Investment Research

New Federal Reserve Chairman Jerome H. Powell (above) showed up at the Rayburn House Office Building on February 27 to deliver his first semiannual testimony before the Committee on Financial Services. Before he dug into the details of monetary policy, Powell described the outlook for the U.S. economy as bright androbust: “The U.S. economy grew at a solid pace over the second half of 2017 and into this year.” setting an optimistic tone for his interpretation of the current economy and prospects for the future. He emphasized that U.S. economy, from his perspective, is getting better, stating that, “my personal outlook for the economy has strengthened since December.” Apparently, the new Chairman of the Fed has full confidence in this country’s economy despite the Dow Jones’s plunge of more than 600 points in the same month.
EconomicOutlook
Here are some highlights from Powell’s testimony.
Labormarket:job growth since last year has been solid enough to lower the unemployment rate to 4.1%;…