It is no hidden fact that the economy in the United States is recovering over the past few years. However, since the devastation of the brought by the last recession, massive reports and critical analysis indicate that we still haven’t overcome the worse and predictions about our economic decline keep seems to speak louder.
April’s last held Yellen meeting contributes as a great factor in these economic expectations.
Why is the Yellen Meeting Significant to our Current Economic Conditions?
It is a very unusual circumstance for the US President, the Vice President and the head of FED, Janet Yellen, to be present in a same meeting at the same time.
In fact, it is even more unusual for both the President and Vice President to be acting in the same rendezvous due to national security reasons.
So looking at this rare circumstance alone, this suggests that the state of our economy is still a huge concern for our national leaders.
The FED’s Responsibility
The FED is an independent body from the government, who are responsible for setting interest rates and the general upkeep of the economy.
- They are not compelled into any target figure for the state.
- The FED mostly have nothing to do with the undertakings of the state.
- Decisions on interest rates and others similar thereto usually go above the state.
Current issues for the FED:
International Divergent Monetary Policy
This is the present strategy imposed by the Federal Reserve, in order to regain policy normalization globally; introduced at the time of recession, it was largely welcomed for its ambition to bring back economic stability.
Its terms allow Central Banks like the ECB, FED, Bank of Japan and Bank of England to use quantitative easing (asset purchases in large scale), in order to influence lower interest rates in the longer term – a strategy to compress the global premium.
The prime function of the US monetary policy is to implement normalization to nations, this means interest rates will eventually rise naturally.
Big international financial markets are closely tied in with US markets, so interest rates set by the FED will always influence international markets, like England, Japan, Canada and Europe.
However, many reports that came back on global term premiums has begun finding a few problems with foreign markets.
After the FED raised interest rates last December, it caused the dollar to depreciate against the Euro and the Yen – mainly due to a weak inflation growth.
The Current State of Inflation
Inflation has remained stubbornly low, ever since the recession hit, which has been put down to very slow wage growth and a shocking fall in oil prices.
However, very recently, inflation has started to spike up; energy and volatile food included, the core price rose by 1.7% (The FED’s annual inflation target is 2%).
What the statistics say…
The global economy is still in a state of slow recovery, especially for where inflation is concerned and the market’s reaction to the last interest rate hike. However, as figures didn’t plummet, and instead stagnated for a duration; this makes another increase of 0.25% looking likely at some point this year.
Future Economic Prediction:
The mood surrounding the next Yellen Meeting is making rate hikes seem unlikely, however, if we are witnessing inflation to be soon reaching its 2% target, then it will definitely be on the cards to happen later this year.
Unfortunately, inflation alone doesn’t keep us out of trouble.
The problems we still face:
- The housing bubble may collapse again.
- Uncontrollable debt in the finance sector, from mortgages and lending.
- If the recession hits us again then we will return to high unemployment and home repossessions.
What we can do for ourselves:
In all honesty, we can never truly know what’s coming for us, but to limit the damage from another recession then here are some tips:
- Stay in private rent until you have saved over half the value of your desired property.
- If you are struggling with debt, then consider a debt consolidation loan – simplify into one payment and minimize your interest.
- If you do need a new loan, then ensure interest is fixed and not liable to change within economic conditions.
- You can’t fully control your job security, but do your utmost to be a valued asset.
- Learn a trade or skill, to still be required in a broken economy.
The Round Up:
It’s still a time of uncertainty and guessing games, especially for the President and Vice President to both be involved with the FED meeting – many unexpected challenges have come from China, the oil industry, the steel industry, instability in the Middle East and the depreciating dollar against the Euro and Yen.
However, 2016 has experienced a few good signs too, so although interest rates may not go up yet, if inflation performance keeps to the same pattern of the last few months, then it should definitely happen later this year.