empty
07.05.2019 01:33 AM
The Fed is working to solve the problems of the world economy in conditions of low inflation

This image is no longer relevant

The Fed fears that it is poorly prepared to deal with the next recession as part of its current approach to targeting inflation. In addition, efforts are being made this year to test new interest rate management strategies around the world with low inflation and borrowing costs. But US central banks and monetary policy experts face a more difficult task: not only to create a solid foundation before the next recession, but also to convince the public that this actually works.

When central banks around the world turned to unconventional instruments, such as bond purchases and forward management, to deal with the financial crisis of 2007–2009, they thought they were faced with unique conditions. But a decade after the end of the Great Recession, it is clear that the Fed is dealing with a new economic norm. It is expected that neither inflation nor interest rates will rise significantly, even if unemployment in the United States reaches an almost 50-year low. This leaves the US central bank with much less opportunity to lower interest rates in order to stimulate the economy. Thus, this year, when the US economy is stable, interest rate policies are paused, the Fed believes they have a breather to figure out how to make policies more effective when the next recession occurs.

Among the ideas: to commit to compensating for periods of low inflation with periods of inflation above the target; look at the final economic result, rather than inflation; use negative interest rates to force enterprises to invest and banks to lend during a recession. All of these measures will act as shock absorbers to alleviate economic weakness and reduce recession. Weighted average inflation targeting is the base case, which still receives the most support. The idea, as explained by the President of the Federal Reserve Bank of New York John Williams, is to focus on the average inflation for a certain period, for example, for a year and a half.

Irina Maksimova,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

US Market News Digest for May 13

Citigroup shares are posting steady gains after breaking above key technical levels, signaling potential for continued upside. Market participants view the bank's stock as promising amid signs of stabilization

Ekaterina Kiseleva 12:38 2025-05-13 UTC+2

NRG Energy soars after $12 billion deal — new players in energy?

Indices rise: Dow 2.81%, S&P 500 3.26%, Nasdaq 4.35% Stocks outperform safe havens on trade easing Apple rises on report of considering iPhone price hike Wall Street fear gauge dips

Thomas Frank 12:11 2025-05-13 UTC+2

US Market News Digest for May 12

US stock indices are advancing on a wave of optimism surrounding potential progress in trade negotiations between Washington and Beijing. Investors are hopeful that an eventual agreement could ease geopolitical

Ekaterina Kiseleva 15:25 2025-05-12 UTC+2

Hope for Trade Peace: How US-China Talks Have Rocked European Stock Exchanges

Markets rise: US and China are getting closer in trade talks. UniCredit in the green: profit above expectations, forecast raised. Pharmaceuticals weaken: shares of large companies fell by 1-5%. Futures

Thomas Frank 11:02 2025-05-12 UTC+2

US Market News Digest for May 8, 2025. US stock indices close higher on trade deal optimism

Major US stock indices ended the session in the green, supported by statements from Donald Trump indicating progress in negotiations over a major trade agreement. The market interpreted this rhetoric

Ekaterina Kiseleva 14:00 2025-05-08 UTC+2

Gold slips, stocks sink: what India, Germany and the Fed have in common

Equities are falling on stalled tariff agreements ahead of the Fed decision. Gold is sliding on renewed US-China talks. UK and India have clinched a major trade pact. Friedrich Merz

12:36 2025-05-07 UTC+2

US Market News Digest for May 7

The major US stock indices closed in negative territory, with the S&P 500 down 0.8% amid growing uncertainty about trade policy and anticipation of new comments from the Federal Reserve

Ekaterina Kiseleva 12:20 2025-05-07 UTC+2

Gold falls, stocks plunge: What India, Germany and the Fed have in common

Stocks fall on lack of tariff deals ahead of Fed policy decision Gold falls on hopes for US-China trade talks; UK, India reach trade deal after 3-year talks Germany's Merz

Thomas Frank 07:05 2025-05-07 UTC+2

US Market News Digest for May 6, 2025

The US stock market opened the week in turmoil. Berkshire Hathaway shares were trading under pressure after Warren Buffett had Stepped down as CEO. Investors are concerned about the company's

Ekaterina Kiseleva 13:52 2025-05-06 UTC+2

$9 Billion for Skechers, falling indices, and surge in Asian stocks

Berkshire Hathaway slips after Warren Buffett steps down as CEO. The US services sector shows growth in April. Skechers surges following a $9 billion privatization deal. Investors await trade agreements

13:26 2025-05-06 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.