MEMORADUM

Topics: Inflation, Monetary policy, Federal Reserve System Pages: 1 (270 words) Published: November 23, 2014

MEMORADUM

To: Janet Yellen
The Chair of the Board of Governors of the Federal Reserve System FROM: Chao Song
Finance student, Seattle University
Cell phone: 425-381-6871, Email: songc1@seattleu.edu DATE: October 22, 2014
SUBJECT: Federal Funds Rate
To set the target federal rate is a key tool in its conduct of the U.S monetary policy. We have decreased Federal funds rate many times since 2007, and the result shows that we have achieved the target of economic growth. However, I am worry about excessive monetary stimulus would hurt economic again. I think we should make appropriate adjustments. Following sentences will explain my suggestion. Based on the Macroeconomic indicators (August 2007-Present), the GDP growth rate have increased from 2.7% to 4.6%, which increase 70.37%. S&P 500 and DJIA have increased from 1473.99 and 13357.74 to 1886.76 and 16380.41. These results show our economic is going to back on the track again. More important, the producer price index has increased from 166.1 to 201.5, which increase 23.31%. Interest rate has a huge decreased, especially for the 3- month T-bill that has decreased from 4.32% to 0.02%. Too much money in the market would increase inflation. These dangerous date values have proved that a bubble forming in the market. If we do not make some appropriate adjustments now, we would have troubles again in the future. Although the unemployment rate has increased from 4.6% to the 5.9%, it is still on the control. The excessive monetary stimulus after the technology bubble burst in 2000, which is behind much of today’s pain. If we keep stimulus economic, the bubble burst is only a matter of time. Therefore, I suggest that make appropriate adjustment to prevent the economy overheating.
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