The Effect Of Long Term Inflation On The Economy Essays

The Effect Of Long Term Inflation On The Economy Essays

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According to the information published in March by Federal Open Market Committee, even though there is no high growth in economic activities the conditions of the labor market has improved. There has been a lot of improvement in the housing sector, but the business investment and net exports have become soft from the beginning of the year 2016. According to the press released on April 27, 2016,” Inflation has continued to run below the Committee 's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports”. In the recent month, the measures of long term inflation based on the survey are expected to be changed by little and the measures of inflation based on Market remain low. The committee tends towards maximizing the employment opportunities and keeping the price stable. The committee has recently expected that, the activities related to the economy will expand moderately and the labor market strengthens if the adjustments in monetary policy are made.
According to the committee, the inflation rate is expected to be low now and will rise by 2%. The committee has also decided to maintain the federal funds rate at 1/4 to 1/2 percent. (federalreserve.gov). The monetary policy will be helpful in supporting for the improvement in the labor market and to get a return of 2% inflation.
. The committee will realize the economic condition and 2 percent inflation prior to determine the time and the size of the future adjustments in the targeted federal funds rate. For this assessment, the committee will collect various information regarding the conditions of labor market, indicators of inflation and information on financial and foreign developments. The committee will also lo...


... middle of paper ...


...%, 1.9% in 2017 and 2% in 2018.
Hence, the economic condition of the United States looks good and healthy. Analyzing the survey, the Gross Domestic Product of the country will be same within 2% to 3% range. There will be continuity of unemployment at the natural rate which is even better because there is always a cycle of people leaving and coming for the jobs. Inflation rate or deflation is not too high which indicates that the economy of the country is moderate (not too good and not too bad). Due to the good economic condition, the investors are so confident and believe that the value or the prices of assets will always rise up which is totally wrong because this confident may create damage and leads the economy to decline. There is a big change in the economy in the year 2016 because of the crude oil production. The oil prices were reduced by 25% in 2014 and 2015.

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