Federal Reserve Report

U.S Federal Reserve presented a report to the Congress on February 24th 2010 detailing its steps and action plans that they desire to take to achieve macroeconomic stability and take back the economy to stabilization and growth position greatly hampered by the 2007/2008 international financial and economic crisis. The report records that the economic indicators showed an upward trend with a real GDP growth rate of about 4 per cent in the second half of 2009 recovering from declining trends experienced in 2008 and half of 2009. In efforts to promote this trend and work towards providing public assurance and confirmation, Federal Reserve released the Supervisory Capital Assessment Program (SCAP) report which aimed at providing to the public, private and investor confidence to the performance of the economy and the health conditions of the economic institutions besides elucidating the financial positions of the largest holding financial enterprises in the economy. The Federal Reserve also increased the Term Asset-Backed Securities Loan Facilities to consumers to demonstrate their confidence in the recovery process and the whole economic outlook towards a positive direction (BGFRS 2010).

Monetary policies are deliberate and intentional policy measures taken by the monetary authorities of a country to affect changes in the economy to achieve a desired level of macroeconomic target through money supply and interest rates. When an expansionary monetary policy is implemented, the economic liquidity increases and access to credit both for households and corporate entities increases. This enables economic units to venture in investment opportunities creating employment opportunities while boosting the production capacity and overall output. Production increases as a result of assured equity provided both by the government and the commercial financial intermediaries like the commercial banks. When interest rates are lowered in an economy, the incentive created allows more capital to be available as loanable funds and also the environment for doing business is enhanced through guaranteed and attractive returns to firms. This in turn boosts the economy’s production capacity since the low interest rates have provided more liquid in the economy. As this trend takes root in the economy, employment increases through the multiplier effect in the economy (BGFRS 2010).  

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