A Quote by Janet Yellen
Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.
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The degree of monetary policy ease should be associated with the level of real interest rates, not nominal interest rates.
Monetary conditions exert an enormous influence on stock prices. Indeed, the monetary climate - primarily the trend in interest rates and Federal Reserve policy - is the dominant factor in determining the stock market's major direction.
Paying interest on reserve balances enables the Fed to break the strong link between the quantity of reserves and the level of the federal funds rate and, in turn, allows the Federal Reserve to control short-term interest rates when reserves are plentiful.
Transparency concerning the Federal Reserve's conduct of monetary policy is desirable because better public understanding enhances the effectiveness of policy. More important, however, is that transparent communications reflect the Federal Reserve's commitment to accountability within our democratic system of government.
Fiscal policy, monetary policy, they need to work together to try and raise the level of growth.
A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
Monetary policy has less room to maneuver when interest rates are close to zero, while expansionary fiscal policy is likely both more effective and less costly in terms of increased debt burden when interest rates are pinned at low levels.
In 2001, when the economy was strong, the country was able to absorb substantial deficit spending in the wake of September 11 without constricting the Federal Reserve's flexibility to ease interest rates.
...the Federal Reserve has the capacity to operate in domestic money markets to maintain interest rates at a level consistent with our economic goals
Inflation is certainly low and stable and, measured in unemployment and labour-market slack, the economy has made a lot of progress. The pace of growth is disappointingly slow, mostly because productivity growth has been very slow, which is not really something amenable to monetary policy. It comes from changes in technology, changes in worker skills and a variety of other things, but not monetary policy, in particular.
If the Federal Reserve pursues a policy which Congress or the President believes not to be in the public interest, there is nothing Congress can do to reverse the policy. Nor is there anything the people can do. Such bastions of unaccountable power are undemocratic. The Federal Reserve System must be reformed, so that it is answerable to the elected representatives of the people.
The Obama administration's attempted short-term fixes, even with unprecedented monetary easing by the Federal Reserve, produced average GDP growth of just 2.2% over the past three years, and the consensus outlook appears no better for the year ahead.
In my view, the key aim of economic policy in many countries, and particularly in Russia, should be the sort of policy that stimulates productivity growth because only on the basis of growth of labour productivity can we enjoy healthy growth.
There are times when a market such as housing, transportation or the stock or mortgage market keep rising and people with capital want to join in this growth. Soon the markets become overheated, partly because of the abundance of investment money and speculation. This is when the government should raise interest rates and increase the cost of borrowed money. Governments are shy about doing this because it could cause the very recession. Yet this is the best time to do this so that the inevitable recession never reaches the magnitude of the recent Great Recession.
How can you raise the level of consciousness on this? How can you get the federal government to take the responsibility? Florida does not have a foreign policy. This is a federal policy or absence of federal policy. It's so clear that we're not being treated fairly. We have to come up with a solution. It hurts your head trying to figure out what to do.
The greatest economic power might in fact remain in the hands of the Federal Reserve. Economists credit the Fed's policy of keeping interest rates at historic lows with helping to pump up the economy and bring unemployment down.
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