The Federal Reserve System (the Fed) is one of the most important financial systems in the country and influences the overwhelmingly intertwined domestic and global financial system. In the past few years, the Fed has undertaken a policy of rate hikes to keep the federal funds rate above the rate of inflation. This is a step intended to ensure the price stability of the national economy and provide greater stability and predictability for market participants.
Below are the key points of this policy and the effects it has had:
-Increasing the Fed funds rate to keep it higher than the growth rate of inflation: The rate hikes have enabled the Fed to effectively contain inflation and ensure a stable price level in the economy overall.
-Provides assurance and predictability to the marketplace: Market participants, both domestic and international, have increased confidence in the Fed’s ability to manage the economy, leading to greater predictability and stability in the finance/investment world.
-Improves overall perception of the Fed: By taking such a proactive stance on maintaining the financial system, the Fed has fostered an improved perception of itself, which is beneficial both domestically and internationally.
The Fed has made strides in recent years to keep the federal funds rate above the growth rate of inflation, which has had a positive impact on the entire national economy. The Fed’s policy of raising rates has improved the overall stability and predictability of the marketplace and made positive changes to the perception of the Fed itself. This is good news for all market participants.
You can read this full article at: https://www.housingwire.com/articles/core-inflation-makes-the-case-for-a-fed-pause/(subscription required)
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