The United States' Inflation Rate and Factors Affecting it
The United States' inflation rate is currently low, resulting in slow economic development. Low inflation in the United States can be attributed to a variety of factors, including consumer caution. Another reason is that numerous companies and businesses have similarly limited their investment. Nevertheless, US Federal Reserve officials' predictions and advise on the recovering of the inflation rate have failed to materialize. For example, the Federal Reserve Bank of Atlanta predicted 4% annual growth in the second quarter, but actual growth was 2.5 percent for the same period (Alessandri & Mumtaz, 2017). According to the chairperson of U.S. Federal Reserve, Ms. Yellen, has linked low inflation rate to the fall in prices of prescription drugs and mobile phone service plans.
Monetary Policy and Its Impact on National Goals
Monetary policy and actions by the Federal Reserve influence national goals by controlling the amount of inflation. Moderate inflation assists the economy to rebound in case it plunges into the economy. The controlled inflation assists the Federal Reserve limit borrowing costs and raising wages paid to workers (Bordo & Haubrich, 2017). Also, moderate inflation helps to quickly increase the profits accrued by firms and businesses hence creating more employment opportunities.
The Fed's Challenge in Achieving National Economic Goals
The national economic goals include achieving full employment, controlling inflation, sustaining adequate growth, and creating a stable balance-of-payments position. The U.S. Federal Reserve has not been able to address any of these goals since the rate of inflation has remained low for the past six consecutive years. Without modest inflation, it is difficult for the Federal Reserve to influence national economic goals. In my opinion, the U.S. Federal Reserve has failed in achieving a balance since all standard measures to achieve moderate inflation have not been fruitful.
References
Alessandri, P., & Mumtaz, H. (2017). Financial conditions and density forecasts for US output and inflation. Review of Economic Dynamics, 24, 66-78.
Bordo, M. D., & Haubrich, J. G. (2017). Deep recessions, fast recoveries, and financial crises: Evidence from the American record. Economic Inquiry, 55(1), 527-541.
