Monetary Policy: Monetary policy refers to a series of actions that the United States Federal reserve undertakes for purposes of influencing the availability of credit and cost of money, for purposes of promoting national economic growth…
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The discount rate refers to the amount of interest that the Federal Reserve charges to commercial banks and other financial depository institutions for the various loans that they acquire from the discount window of the Federal Reserve. The reserve requirements can also be referred to as the reserve cash ratio. This is a requirement that banking institutions need to deposit a certain amount of money to the Federal Reserve against the various deposits that is made by their respective customers. Open markets operations on the other hand involve the processes of the country’s central bank to sale and buy government bonds in an open market (Orphanides and Volker, 27). The main aim of using this tool as a monetary policy is to manipulate the supply base of money within an economy, and the short term interest rates, for purposes of controlling the nature and level of money supply within an economy. This paper develops a monetary policy that differs from the last policy statement issue by the FOMC. The last policy statement by FOMC was released on 30th of October 2013. Under this policy statement, FOMC denotes that it will continue with its asset purchasing programs. This is because the committee had noted that the policy gained efficiency in improving the economic activities of the United States of America. The committee also has plans to adjust the pace of its asset purchases, but it is still waiting for a report on the levels of progress that the current pace in asset purchasing has an influence in the American economy (Press Releas, 2). According to this policy statement, FOMC made a decision to continue with the purchase of additional mortgages that are backed with securities. This is at a price of $ 40 billion every month. The FOMC also decided to buy long term financial securities at an amount of $ 45 billion every month. Under this policy statement, the FOMC decided to maintain its policies of re-investing principal payments (Press Release, nd. 3). These principal payments emanate from its various holdings of the agency debts and mortgage backed securities. The FOMC also decided to sale matured treasury securities through an auction method. By implementing these policies, the FOMC believes that they would manage to maintain and achieve a down ward pressure on long-term interest rates. The FOMC also believes that they will manage to support the mortgage market, helping to create a broad financial condition that is more accommodative to the various economic and financial interests within an economy. On this note therefore, the FOMC decided to continue with its purchases of mortgage backed securities. This will in turn lead to the growth and development of the economy under consideration. For effective implementation of these policies, the FOMC decided to closely monitor all information concerning the financial and economic development of the country. The monetary policies identified by FOMC do not solve the problem of liquidity. Liquidity is a Macro economics issue that refers to the extent in which a security or an asset can be sold or bought without having an effect on the price of the particular asset. One major characteristic of liquidity is the high number of trading that the asset under consideration attracts. Examples of assets which are highly liquid include securities of money market. During the 2007 credit crunch, it was very difficult for people to access funds such as loans (Orphanides and Volker, 33). Due to the difficulties of accessing credit, then
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Central banks also acts as the government banks bank and the government lend or borrows through it. It also acts as the lender of last resort to the financial sector during the financial crisis. It is through the central bank that the government borrows from the public through the issue of treasury bonds and bills.
Since the time of King William of Orange, central banks around the world have become influential and important for functioning of the economy and countrywide security and welfare. As importance of the government for the welfare of all citizens increased, so did the central bank’s importance (Cechetti & Schoenholtz, 2011, Chapter 15).
As the new roles of central banks changed into agencies of public policy, there were underlying objectives that were infrequently stated. In the context it is used, an individual can conclude that objective that underlie all functions for the interest of the economy, is consistent with economic policy of the government.
Central banks are also normally concerned with currency, collection, as they are the bank of the government. They control the credit structure, supervise commercial banks, deal with exchange funds and operate as a lender of previous alternative. 1. Discuss briefly the five objectives of central banks.
For many years, the people who study Economics, especially in the field of macro-economics, have given an utmost importance on the study of monetary policy. It is very crucial in understanding the economic system of one country.Many people consider the country’s monetary policy as a complex economic subject.
Financial markets are further divided into money markets and capital markets. Money markets deal in securities with a maturity date within one year. Capital markets mature in longer time frames. Bonds are debts with a maturity date, the investor loaned the business money. A stock has no maturity date; the investor owns a portion of the business.
The market competition in this segment is high but so are the returns on the original investment. The contention is to create a supply chain mechanism that reflects the needs of the United States market and fulfills them using suppliers and manufacturers in the South East Asian region initially.
Name: Professor: Course Code: Date of Submission: Introduction: Franchising refers to the use of another organizations successful business model. For a person issuing out the franchise, this is a form of developing a business chain, through minimizing of risks.
One of the most remarkable definitive features of the modern world is the explosion of information, which is particularly attributable to the rapid increase and advancement of information communications technology. The present analysis is particularly interested in the application of technology in educational thinking and practice respectively.
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