Federal Reserve and Interest Rates free essay sample

Analyzes capital market activity (employment, manufacturing, sales) leading up to the September 24, 1996, decision to not raise rates. The Fed has now raised the federal funds rate four times in the last eight months, and is poised to raise it at least twice more later this year. Yet the economy continues to exhibit runaway growth. Doesnt monetary policy matter anymore? Even during the mid-1990s there was some evidence that changes in interest rates did not have the same impact on real growth, as was once the case. During 1994 short-term rates rose three percentage points and long-term rates rose two points; yet the following year, the growth rate fell only 1.3 percentage points, from 4.0% to 2.7%. The old rule of thumb had been that a one-percentage point rise in interest rates reduced the real growth rate by one point the following year. By comparison, the 1990-91 recession was marked not only by rising interest rates, but also by an inverted yield curve and a cutback in credit driven by the reaction to the savings and loan scandals. We will write a custom essay sample on Federal Reserve and Interest Rates or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page