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Fostering Maximum Employment and Price Stability - Assignment Example

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This paper "Fostering Maximum Employment and Price Stability" focuses on the fact that since the last meeting, information received is that economic activity has been expanding at a great pace. There has been an improvement in a labour market with the issue of unemployment decreasing.  …
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Fostering Maximum Employment and Price Stability
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Fostering Maximum Employment and Price Stability
Since last meeting, information received is that economic activity has been expanding at a great pace. There has been improvement in labor market with the issue of unemployment decreasing. Underutilization has been witnessed to be diminishing. Household spending has also been rising as a result of declines in energy prices. Additionally, inflation has deteriorated further below the committee’s longer run aim. Survey based measures of longer term inflation forecasting have remained stable. The committee seeks to put appropriate policies to ensure that it achieve most of its goals economically. To foster maximum employment and price stability, the committee reassured that its target of 0% to 0.25 % rate remains appropriate. In establishing long term goals, the committee has established measures that shall be used for monitoring and evaluation techniques which will take into account a wide range of information regarding the current market structure. Nevertheless, if updates indicate faster progress toward the committee’s employment and inflation objectives than the committee is currently expecting, then increases in the target range for the federal funds rate are likely to happen sooner than expected. On the other hand, in cases progress appears to be slower than anticipated, and then increase in the target range are certainly to occur later than is currently anticipated.
According to last two statements, the committee’s stance is has not changed on maintaining its current policies regarding reinvesting principal payments from its major holdings of agency debt as well as agency mortgage backed securities and of rolling over maturing treasury securities at auctions. It is currently anticipated that even after employment and inflation are closer to mandate consistent levels, economic situation may for a while, warrant keeping the target federal funds rate below levels the committee views as normal in the longer run.
Report summary for the ECB
The council decided to keep the key ECB rates unchanged, as regards nonstandard monetary policy measures, the aim is now on implementation. Following the council’s prior meeting, the council shall start purchasing euro-subjugated public sector securities in the secondary market. Additionally, the council shall continue purchasing asset backed securities as well as covered bonds which had begun the previous year. The joint monthly purchase s of private and public sector securities will total to £60 billion of which are intended to be carried out until the end of September 2016 and will always be adjusted until there is proper adjustment in inflation path which is consistent with the council’s aim of achieving inflation rates below, but close to 2% over the medium term. There are positive effects that have already been witnessed with borrowing conditions improving considerably for firms and households. Money and credit dynamics have been firming. The council has set policies that ease developments for the euro area economy. According to reports, real GDP in the euro area rose by 1.5% in the year 2015, 1.9% in 2016 and 2.1% in 2017. There are also significant economic developments as a result of activities in the current year. Turning to the monetary analysis, recent data confirm the gradual increase in the underlying growth with annual growth rate increasing to 4.1% in January 2015, up from 3.8 per cent in December 2014. Annual growth in M3 is still being supported by its most of its liquid components.
The outcome of the economic analysis with the signals coming from the monetary analysis confirms the suitability of the council’s recent decisions. Monetary policy is aimed at maintaining price stability over medium term and its accommodative stance contributes to supporting economic activity. Fiscal policies are supposed to support economic recovery while maintaining compliance with the stability and growth pact. Read More
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