The Federal Open Market Committee Essay

1132 Words Nov 13th, 2014 null Page
The first signs of trouble leading to a recession began when economic activity continued to decline in payroll employment which occurred in December, 2007. The unemployment rate increased from 4.7 percent in November, 2007, to 6.1 percent in September, 2008 (Hetzel). The uproar of an economy breakdown had begun. The recession, or some call it the financial crisis, was created because there was too much money being created by banks too quickly. This led to an increase in housing prices and a gamble on financial markets. A downward turn took its toll and the economy started to shrink. The job of maintaining acceptable economic growth, high employment, and stable prices is achieved by the Federal Reserve taking money out or putting money in. When a recession happens, the Federal Reserve wants to expand monetary policy. The Federal Open Market Committee (FOMC), organized as part of the Federal Reserve, is a main contributor to achieving monetary targets. Open market operations, which are managed by the Federal Open Market Committee, are the main tool in monetary policy. In the normal case of recession, this involves purchasing government securities. The goal of this approach is to alter the federal funds rate so that it stays around the target rate created by the FOMC. On December 16, 2008, the Federal Reserve announced that the policy would be focused on stimulating the economy through open market operations (Kendall). The Federal Open Market Committee took its first…

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