The Federal Open Market Committee Essay example

1515 Words Dec 5th, 2016 7 Pages
Since its inception in 1913, the Federal Reserve System has acted as an intermediary between central banks and the public via regulation of monetary policy. Monetary policy is the management of money and interest rates that can help policymakers predict future macroeconomic situations (Mishkin p. 10). In this article, Brent Bundick, an economist at the Federal Reserve Bank of Kansas City, explains how policymakers and members of the Federal Open Market Committee can forecast future monetary policy and communicates it with the public. Policymakers use these projections to estimate inflation, unemployment, output growth and interest rates. Due to the financial crisis of 2008, the Federal Open Market Committee has used less conventional methods then in the past. Interest rates plummeted as a result of the financial crisis which put the United States economy in what is known as a zero bound period. A zero bound period can be described as, “a situation when the Federal Reserve has lowered short-term interest rates to zero or nearly zero, causing new methods of economic stimulus to be examined and implemented” (www.investopedia.com). In regards to forecasting future economic situations, policymakers have played an imperative role since the financial crisis of 2008 by attempting to provide investors with accurate projections of the overall economy. The Federal Reserve System performs five main functions; it conducts the nation’s monetary policy, promotes the stability of the…

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