...consumer confidence, as measured by The Conference Board, is up 5.5 points in October to 94.5 rebounding from 89.0 in September. Expectations increased even greater to 95.0 from 86.4 in September. Both index increases infer growing confidence and positive expectation in current policy. These data will translate to more spending in the aggregate leading to more employment with the probability of increased productivity to supply the demand for goods and services. Consumer Income The US Department of Commerce Bureau of Economic Analysis (BEA) reports personal income increased 0.2 percent for the month of September 2014, and disposable income rising 0.1 percent during the same period. Of note, personal expenditures dropped 0.2 percent equaling this increase. Tis effectively negates any positive contribution to aggregate demand, and in fact, has potential to create an over-supply of goods and services. Interest Rates The Federal Reserve reports no significant changes in key interest rates during the past three months. The...
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...This summary of the most recent report of the Federal Reserve shows steady growth in regards to the strength of the economy, but slightly less aggressive than last year. It is noted that payroll employment has increased by 210,000 on average per month in comparison to 260,000 last year. The unemployment rate dropped by a quarter percent to 5.3 percent in June. It is estimated that labor market resources are not being fully utilized because part time employees looking for full time remains high even though slightly decreasing. Consumer price inflation remains below the FOMC’s goal of 2 percent. The price index of consumer spending increased a quarter percent since last May. This in part is affected by lowered gas prices. Long run inflation estimates have remained stable and real gross domestic product has been little changed since last year in this first quarter. It is expected that inflation will rise to the expected level in the near future. Longer-term interest rates have increased since last year and auto and student loan balances continue to grow higher. This seems similar to the increase in housing loans in the prior decade. Hopefully the amount of default loans will not arise from poor bundling packages. Borrowing by lower rated businesses has increases rapidly as well. It has maintained to implement a low rate for the Federal Funds rate varying from 0-.25 percent. It plans to raise the federal funds rate once employment figures are up to par and the inflation...
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...fedrThe Federal Reserve Policy from 1999 to the Present: The monetary policy of the United States has two basic goals that are outlined in a 1977 amendment to the Federal Reserve Act. These basic goals are: to promote "maximum" sustainable output and employment while promoting "stable" pricing [1]. It has become the responsibility of the Federal Reserve Board to try in: Maintaining the stability of financial systems and contain risk that may arise in financial markets. Regulating banking to ensure safety and soundness protecting the consumer from harm while using credit and banking services. Overseeing the nation's payment systems providing financial services to financial institutions, the U.S. government, and foreign institutions. Stabilizing world pricing and creation sustainable employment. While the Federal Reserve Board is in a constant challenge to perform these above tasks. The economy goes through business cycles where the output of goods and services and the employment rate of the country are above or below their long running levels. The term "monetary policy" refers to what the nation's central bank or Federal Reserve happens to administer so that they may influence the amount of money and credit in the U.S. economy. What happens to this money or the credit during this time will directly affect the interest rates and the performance of the U.S. economy and its people. Stabilizing the U.S. economy has become paramount for the Federal Open Market...
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...FEDERAL RESERVE • In 1913 the Federal Reserve Act was passed, establishing reserve requirements for those commercial banks that chose to become members. • There are 12 Districts across America • It earns most of its income in the form of interest on its holding on US. Government securities as well as providing services to financial institutions. • The income earned is transferred to the Treasury • It regulates commercial banks and conducts monetary policy, adjusting the money supply to achieve full employment and price stability ( low inflation) • Has five major components o Federal Reserve District Banks o Member Banks o Board of Governors o Federal Open Market Committee o Advisory Committees Federal Reserve District Banks • Federal Reserve District Cities: o 1. Boston, Massachusetts o 2. New York, New York (Most important District City) o 3. Philadelphia. Pennsylvania o 4. Cleveland, Ohio o 5. Richmond, Virginia o 6. Atlanta, Georgia o 7. Chicago, Illinois o 8.St. Louis, Missouri o 9. Minneapolis, Minnesota o 10. Kansas City, Kansas o 11. Dallas, Texas o 12. San Francisco, California • Commercial banks that become members must purchase stock in the FED • Each District has 9 members o 6 are elected by member banks in which 3 are professional bankers and 3 are engaged in business o The remaining 3 are appointed by the Board of Governors o All nine directors appoint their Fed district bank president • District banks facilitate...
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...The Multiplier Effect Kasie Collins Macroeconomics | ECO201 A02 December 4, 2013 Abstract: This paper measures the effects on the primary U.S. mortgage market. This paper will discuss the Federal Reserve purchasing $1.25 trillion of mortgage backed securities in 2009 and also in 2010. We use an event-study approach and measure the movements in both prices and quantities around the initial announcement of the LSAP and subsequent changes to the program. This paper will show that the LSAP program led to a substantial boost in market activity, with discontinuous increases in searches, applications, and originations for refinance mortgages but not for purchase mortgages. Finally, this paper will show that more creditworthy borrowers were significantly more likely to benefit from the improved credit availability. Introduction The Federal Open Market Committee (FOMC announced a plan for the Federal Reserve Bank of New York. On November 25, 2008, the FOMC announced that the Federal Reserve Bank of New York would purchase $500 billion dollars of mortgage-backed securities (MBS). This was issued by the two main government-sponsored entities (GSEs) for housing, Fannie Mae and Freddie Mac, as well as ones guaranteed by the government agency Ginnie Mae. The purpose of large-scale asset purchase (LSAP) program was to reduce the spread between mortgage interest rates and other interest rates of similar duration. This action is being taken to reduce the cost and increase the availability...
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...impact on the economy. There were clues that the economy may have actually slightly contracted instead of expanding. “The United States economy reversed course in the final quarter of 2012 and contracted at a 0.1% rate and was the worst performance since the financial crisis in 2009.” (Mataconis, 2013) . Even with the overall contraction, the economy is not on the brink of a recession or an extended slump. Companies are still spending. The economy we have been living in since 2009 is going to be the new normal. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. The current prime rate is 3.25%, federal discount rate is 0.75%, fed funds rate is 0.25%, and the 11th District cost of funds is 1.071%. Changes made with federal funds rate and the discount rate also dictate changes in the Wall Street Journal prime rate, which is the interest to borrowers. (Bankrate.com, 2013) The current fixed interest rate for credit cards is 13.02% and for variable interest rate for credit cards are at 15.14%. “The unemployment rate falls to 7.8% as the economy creates 114,000 jobs.”...
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...The Current Financial Environment FIS/260-Financial Markets & Institutions: You Can Bank On It Michael Ricks When I first took a look at this assignment I thought it would be easier than it this. I looked for days on the internet trying to find banks or depositories with credit cards with variable interest rates. What I found was many banks with many credits all with annual percentage rates (APR). So to keep my insanity I just looked at three commercial banks. I looked at Bank of America, US Bank, and Regions bank. I looked at all their credit cards student, business, rewards, and secured. Bank of America credit cards Apr varied anywhere from 12.99% to 20.99%. Here is how they get people, 0% introductory APR for the first 12 billing cycles only for purchases. When that cycle ends your rate will depend on your creditworthiness. US Bank does similar and their rates are from 11.99% to 23.99%. Regions is in the same neighborhood starting at 13.99%, 16.99%, or 19.99% based on credit, but can quickly climb to 24.99% or even 29.99%. Every bank I researched, including credit unions, all based the rate that you would receive on your creditworthiness when you open your account. After that, your APR will vary with the market based on the Prime Rate as set out in the Variable-Rate information section of your agreement. The current annual percentage rate (APR) for a new car can vary from bank to bank, amount to amount, and year to year. It is not something that is...
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...Federal Reserve Monetary Policy ECO/372 University of Phoenix The American economy has been through Hell and back in the new millennium, and for some time economist speculated of the dismal circumstances to affect the U.S financial structure as a whole. This paper is going to highlight a variety of current macroeconomic indicators by specifically defining the objectives of the Federal Open Markets Committee and stating the economic projections for 2015 in hopes of painting a clear picture of the current financial state of the U.S economy. With growth reported in GDP and incomes this past year, there is still concern surrounding overall consumer opinions on the state of our nation’s economy. The results of the Michigan surveys index of consumer sentiment as included as well within the Monetary Policy (2014). This demonstrates the country continues to feel the economy is strengthening as well, as their overall confidence of their own financial situations. However, we are still well below average on the index report which also is reported without much change in the last year. Although we have improved our outlook since the recession that occurred in 2008, we remain guarded and safe in our observations. With slowly increasing consumer sentiment, housing starts continue to increase slowly along with our post housing bubble recession recovery (Monetary Policy, 2014). Single family and multifamily starts show a very slow trending increase but at a .6 high index for 2014...
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...to Federal Reserve Policy? Ben S. Bernanke Kenneth N. Kuttner∗ February 7, 2003 Abstract This paper analyzes the impact of unanticipated changes in the Federal funds target on equity prices, with the aim of both estimating the size of the typical reaction, and understanding the reasons for the market’s response. On average over the May 1989 to December 2001 sample, a “typical” unanticipated 25 basis point rate cut has been associated with a 1.3 percent increase in the S&P 500 composite index. The estimated response varies considerably across industries, with the greatest sensitivity observed in cyclical industries like construction, and the smallest in mining and utilities. Very little of the market’s reaction can be attributed to policy’s effects on the real rate of interest or future dividends, however. Instead, most of the response of the current excess return on equities can be traced to policy’s impact on expected future excess returns. JEL codes: E44, G12. 1 Introduction The reaction of the stock market to monetary policy is clearly a topic of intense interest both to market participants and policymakers. Those holding equities would obviously like to know how possible Federal Reserve actions might affect the value of their portfolios. Similarly, an estimate of the likely effect of policy on asset prices is an important ingredient in assessing the transmission of monetary policy through the “wealth effect.” The size of and of Governors of the Federal Reserve System...
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... Case Contents You should have the following parts to your case. It should be formatted correctly with a title page, running head, abstract, and the case components listed below; headings can be used to mark sections. It should also be in APA format. (If you have questions about what that format is, please contact your librarian or your instructor.) The length of the case analysis depends on the complexity of the case and the thoroughness of your analysis; no one can give you a minimum word count or number of pages. * Your case analysis should begin with a brief description of the case problem. * The case problem description should also include any points of analysis which you have been asked to address, such as questions, reports, forms of analysis, and so on. * Not all cases are designed the same way, so no one can tell you exactly what needs to be included. Use your imagination, but be thorough. * Your case analysis should clearly lay out the steps you followed to address the...
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...nt-Financial-Environment Final Project: The Current Financial Environment Research and compare the following services provided by three different commercial banks or other depository institutions: the current interest charged on a variable credit card account, the current annual percentage rate for a new car, and the current interest rate on a year fixed mortgage. List the depository institutions and each separate rate. Research and answer the following questions: What is the current prime rate? What is the current federal funds rate? What is the current Fed discount rate? What is the current GDP? Discuss, in a 1,050- to 1,400-word analysis of your findings, the current financial situation, and explain in detail how the federal funds rate and discount rate are related to the prime rate, and how the prime rate in turn is related to the services provided by the banks you researched. Address the following points in particular: a. The date of the last federal funds rate increase or decrease b. The amount of the increase or decrease c. The rational behind the latest increase or decrease d. The effect of the increase or decrease on the overall economy and upon you as an individual. Do not include any specific personal financial data. Cite your sources. Post your analysis to the Assignment section as an attachment. For more Assignments visit:...
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...that takes about 10-15 minutes to complete. It explains the proper way to redeem a bond and how to detect fraud as well. It also states the importance of using the stamp when redeeming the bond instead of hand writing the information. There is also an issue with time. I have sent several bonds back over the last few weeks and haven’t gotten any back as of yet. I feel that we may have to reiterate that bonds are to be turned in on a daily basis the same as checks. There are several bonds out from February to current and the Federal Reserve requires us to send them end at the end of each month. What is happening is that the tellers will hold them until they have so many then encode them all with the same date and when the report is pulled the amounts don’t match up and I have to go into their teller drawer and find out each amount to match with the reports. This is very time consuming and sometimes I’m still not able to match the bonds with the report. I have listed below a few guidelines to follow when redeeming savings bonds. - the bond must be stamped - the bond must be encoded with total amount (value plus interest) - bonds must be turned in everyday as you would checks - when redeeming make sure member fills out the back of bond completely ( not just a signature) - keep in mind that the bonds have a high chance of being rejected if not redeemed properly All of this information is covered in the training and can also be found on Treasury Direct’s...
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...Foreclosure Problems Persist, Fed Seeks More Fines”, noted three key points, 1) the Federal Reserve is interceding with regards to the foreclosure dilemma, 2) there are flaws in the foreclosure process and 3) consumer’s may quality to request an “Independent Foreclosure Review”. Ms. Silver-Greenberg states the Fed is interceding in the foreclosure dilemma. After an extensive investigation, extending over 2 years according to Silver-Greenberg, by the Federal Reserve resulted in a report entitled “ Interagency Review of Foreclosure Policies and Practices” (2011). The Fed’s have imposed a guideline for the mortgage institutions to follow and if they choose not to, there are talks of imposing stiff fines. The actions of these lenders have affected not only the borrowers, but also the mortgage industry, investors, and the economy itself. I feel that it is a shame lenders were able to get away with their procedural defects as long as they were. This resulted in more consumers being affected and as an end result exacerbated the decline in the economy. According to not only Ms. Silver-Greenberg, but also the report submitted by the Federal Reserve, (2011), there are flaws in the foreclosure process. These flaws are not only inappropriate signatures of bank officials, but also issues with organization of paperwork, customer service, lack of quality control, just to name a few. After reviewing this report, which until now I did not even know existed, I was quite shocked. The testimonies...
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...risk premium can be an individual stock or the overall stock market provides over a risk-free rate. And the size of the premium will be a standard to compensate with a higher premium in the stock market. Thus, a portfolio manager when the equity risk premium increases in the future， the investors will sell out stock market because the stocks are over priced. So the legislators and pension administrators decide how much to set aside to meet future pension obligations, based upon assessments of equity risk premiums. However the history data of ERP (Equity Risk Premium) from Federal Reserve System shows it keeps low and stable state but increases suddenly since 2006. At the same time the Federal Funds Effective Rate goes down and keeps low state. We know that interest rate is a way to control inflation. Inflation is a factor causes too much money chasing too few goods. “Changes in the federal funds rate affect the behavior of consumers and businesses, but the stock market is also affected,” Said by Jim Mueller (2013), PhD Finance in Washington State University. “As the risk-free rate goes up, the total return required for investing in stocks also increases.” In other words, the "risk-free" rate of return goes up, making these investments more desirable. But is the low interest rate push the equity risk premium rate goes up?...
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...Running head: FEDERAL RESERVE PAPER The Federal Reserve is an institution that makes many decisions that affect the American economy. The purpose and function of money will be explained within this paper. This paper will explain how the central bank manages the nation’s monetary system and outline the stated direction of recent monetary policy. The latest action by the Federal Reserve to confirm this direction will be explained. This paper will explain the effects of monetary policies on the economy’s production and employment. Purpose and Function of Money The purpose or function of money is to make an artificial value as a medium used to receive compensation for a service or good. Money makes trade easier between people, businesses and countries. If there was no money, than how would wages be paid to people who produce goods? And how would goods or services be paid for by these people to support them? Typically the value of money can be set by government forces, gold, or market conditions. Management of a Nation’s Monetary System The central bank manages the nation's monetary system by either increasing or decreasing the monetary supply which can increase or slow down inflation, affect interest rates and control the rate in which goods and services increase in relation to one another. The central bank’s main job is to make sure the national currency and monetary supply remain stable. “The Federal Reserve is considered an independent central...
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