The Federal Reserve Rate Of 2016

THE FEDERAL RESERVE RATE OF 2016 Name Institution The Federal Reserve is tasked with estimating the progression of its interest rates, usually at the end of the year, for the next year. These rates are arrived at after careful analysis of prevailing market and political forces. For the second year running, they predicted a rise in the interest benchmark by a 25 basis point oscillating in the range of 0.5% to 0.75%. This Federal Reserve announcement is similar to the one made in 2015; that the rates would close at 1.5% by year’s end. This year however, they have managed to hit their estimates despite conditions being similar to those at the end of 2015. The rate of unemployment hasn’t significantly improved, the Federal target of 2% for inflation is still insurmountable and the global interest rates are still unfavorably low as a direct result of a preference of saving to investment. This may be attributed to several changes in 2016 mainly the election of President Trump. A Republican administration favors tax cuts and high spending, which would be a huge fiscal boost to the economy and the prospect of this consequence has provided a much needed upward boost for the dollar and the treasury yields (R.A Washington, 2016). Other changes are the acceleration of both inflation and wage growth. The author proposes incurring bigger deficits as a solution to the slow growth and low rates. Other economists had proposed the same although they hadn’t envisioned measures as those outlined by Trump. The effects, in the short-run and long-run, would be very different if he was to follow through with increased spending on infrastructure projects supposed to return profit a...