Current Events Articles Summary Explanation Read the current event provided in Canvas and submit your summary analysis in the link provided on Canvas. The writing will be analyzed by www.turnitin.com or SafeAssign which are anti-plagiarism software. Please do no copy/paste unless you cite correctly. Please read below for questions on what to write and for questions on the grading policy, for grading see the Gordon Rule grading rubric on page 3. For each article you must submit a 1-2 page summary/analysis of the article, the correct font is the following: 1. The Article Summary must be Typed double space. (APA Format) 2. One inch margins all around the page. 3. Font 12, Times New Roman or Arial ONLY. 4. Every article must have a Cover Page and a References page as requested in APA 5. Write it ALL in your OWN words, DO NOT COPY / PASTE anything, your grade will be severely penalized if you do so. The current event writing of the article is basically you explaining what the article author is trying to convey. It is an explanative summary analysis of the article. Use the following to guide you through writing the summary. Even though the article writing is not formal, this is a business class and we must write the article accordingly, refrain yourself from making the article summary too personal. 1. Introduce your article summary. 2. What is the article’s main idea. Explain / Summarize in your own words what is the article writing about. 3. What it the issue at hand, what is the author’s point of view, how is the author substantiating his opinion on the matter? 4. Want to get an “A” then use other sources if desired to talk about the same topic and expand the author’s article. 5. End it by providing your opinion on the matter. Do you believe the article is right/wrong and why, is there any right/wrong on this matter? Notice any claims you make must be substantiated by hard information, data that supports your claim. They MUST include a references page and a cover page, the writing must be APA or MLA style. The article is due on the due date as listed on page 1 or before but NOT later. The use of Wikipedia, any other internet blog, question-answer website as a source in not acceptable. Make sure you use acceptable (recognized) sources. Your project will be checked for academic irregularities, you will receive a Zero if the project is found to be someone else’s partial or entire work. All LATE WORK will receive a SEVERE grade penalty, or may not be accepted. All current event sections will be graded on Gordon Rule requirements, format, content, sources, clarity, connectivity, and quality of analysis. Since this course must meet the Gordon rule requirements, you must
Here is the link to the article online in case you want to read it from the source: Federal Reserve Policy to Control Inflation (thebalance.com)
How the Federal Reserve Controls Inflation
The Way the Fed Uses Its Tools to Manage Prices
Updated November 11, 2021
The primary job of the Federal Reserve is to control inflation while avoiding a recession. It does this with monetary policy. To control inflation, the Fed must use contractionary monetary policy to slow economic growth. The Fed's ideal inflation rate is around 2%—if it's higher than that, demand will drive up prices for too few goods.1
The Fed can slow this growth by tightening the money supply. That's the total amount of credit allowed into the market. The Fed's actions reduce the liquidity in the financial system, making it becomes more expensive to get loans. It slows economic growth and demand, which puts downward pressure on prices.2
· The Fed’s annual target inflation rate is 2% over time.
· Monetary tools contract or expand the money supply.
· These tools include the fed funds rate, open market operations, and the discount rate.
· Managing people’s inflation expectations is another important tool.
Tools the Federal Reserve Uses to Control Inflation
The Fed has several tools it traditionally uses to tame inflation. It usually uses open market operations (OMO), the fed funds rate, and the discount rate in tandem. It rarely changes the reserve requirement.
Open Market Operations (OMO)
The Fed's first line of defense is OMO. The Fed buys or sells securities, typically Treasury notes, from its member banks. It buys securities when it wants them to have more money to lend. It sells these securities, which the banks are forced to buy. That reduces the Fed's capital, giving them less to lend. As a result, they can charge higher interest rates. That slows economic growth and mops up inflation.3
Fed Funds Rate (FFR)
The fed funds rate (FFR) is the most well-known of the Fed's tools. It's also part of its OMO. The FFR is the interest rate banks charge for overnight loans they make to each other. It has the same effect as changing the Reserve requirement and is easier for the Fed to modify.4
The Fed also changes the discount rate. That's the interest rate the Fed charges to allow banks to borrow funds from the Fed's discount window.5
The reserve requirement was the amount banks were required to keep in reserve at the end of each day. Increasing this reserve kept money out of circulation. Changing the fed funds rate has the same impact as adjusting the reserve requirement. The Fed eliminated the reserve requirement, effective March 26, 2020.6
Managing Public Expectations
Former Chairman Ben Bernanke noted that public expectations of inflation are an important influencer of the inflation rate.7 Once people anticipate future price increases, they create a self-fulfilling prophecy. They plan for future prices increases by buying more now, thus driving up inflation even more.
On Nov. 3, 2021, the FOMC announced it would allow a target inflation rate of more than 2% if that will help ensure maximum employment. It still seeks a 2% inflation over time but is willing to allow higher rates if inflation has been low for a while.8
The Fed's history of responding to inflation gives you an insight into what may work and what doesn't. Bernanke said the mistake the Fed made in controlling inflation in the 1970s was its go-stop monetary policy. It raised rates to combat inflation, then lowered them to avoid recession. That volatility convinced businesses to keep their prices high.9
History of the Fed's Response to Inflation
Fed Chairman Paul Volcker raised rates to end the instability. He kept them there despite the 1981 recession. That finally controlled inflation because people knew prices had stopped rising.10
The past fed funds fate tells you how the Fed managed the expectations of inflation.
The next chairman, Alan Greenspan, followed Volcker's example. During the 2001 recession, the Fed lowered interest rates to end the recession. By mid-2004, it slowly but deliberately raised rates to avoid inflation.1112
How Well the Fed Is Controlling Inflation Now
After the 2008 financial crisis, the Fed focused on preventing another recession. During the crisis, the Fed created many innovative programs. It quickly pumped tens of billions of dollars of liquidity to keep banks solvent.13
Many were worried that this would create inflation once the global economy recovered. But the Fed created an exit plan to wind down the innovative programs, and ended quantitative easing and its purchases of Treasurys.1415
During the 2020 pandemic, the Fed had to ramp up its quantitative easing and reduce interest rates to combat the swift onset of a recession. The federal funds rate dropped to 0%-0.25% and helped buoy the economy. By 2021, the economy showed strong signs of recovery. However, in October, inflation rose to a startling 6.2% year-on-year, a level not seen since 1990.1617
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