Inflation Essay

Inflation Essay:

Inflation is traditionally considered to be a great threat to the stability of the national economy since the rapid changes in the inflation rate can produce a disastrous effect on the economy. This is why it is extremely important to control inflation and prevent any significant deterioration of the situation even in such developed countries as the US. In this respect, it is worthy of mention that inflation is considered to be a serious problem in the US at the moment and the article “Fed leaves the interests rate unchanged” indicate at the fact that this problem is still relevant and as the author underlines policymakers are “not ready to declare victory on that front”.

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The problem of the correlation between inflation and interest rates amply discussed in the article is really important since it reveals the extent to which inflation may affect national economy. In this respect, it should be said that the policy of the Fed is extremely important since it is Fed’s specialists who actually analyze the current situation concerning inflation and define the national policy in this respect. To put it more precisely, the last decision of the Fed was to “held interest rate steady” and actually such a policy had been typical for the Fed within last year. In such a way, policymakers attempt to maintain the situation stable and prevent deterioration of economic climate in the US.

At the same time, the author indicates at the fact that specialists and policymakers, including the Fed Chairman Ben Bernake, are quite optimistic since, at the moment, inflation demonstrates positive trends. On the other hand, it is hardly possible to speak about the total recovery and the solution of the problem of inflation the US faced last years. The article also underlines that the inflation is determined by numerous factors such as the price of gasoline. At the same time, the article emphasizes that the growing inflation can be a serious threat to the economic growth. In such a situation, it is quite logical that the Fed attempts to thoroughly control inflation and, as the article concludes, the major goal of the policymakers is to be able to prevent inflation from the further growth as well as it is necessary to avoid its transformation into recession.

The article is really noteworthy since it refers to the serious problem of the regulation of inflation and the current policy of the Fed as well as its plans for the future. At the same time, the article rather states the facts without any concern about the contradictive character of the information presented in the article. First of all, it should be said that the officials and policymakers have slightly change their declarations concerning inflation which evolved from ‘slightly elevated’ to ‘moderate’. This is apparently an attempt to smooth the situation and decrease the negative effects of the forecasts concerning the possible growth of inflation. In fact, if the Fed continued to estimate that there remains a risk of the growing inflation that will undermine financial stability as well as deteriorate economic situation in the US at large. As a result, the economic growth of the US would be under a threat because of the negative expectations concerning inflation.

At the same time, the article underlines that the officials are quite optimistic about inflation that means that the situation has really improved. However, the official policy of the Fed still remains unchanged that reveals the fact that the policymakers are still not sure in the further development and inflation growth. Nonetheless, it is necessary to say that the author of the article is conscious of possible threats that the US economy may face in the future and which may affect the inflation rate. This is why the article also refers to such problems as oil prices, level of unemployment and others. In such a way, the author probably attempts to explain or even justify the decision of the Fed to continue its current policy and remain the interest rates unchanged.

Thus, taking into account all above mentioned, it is possible to conclude that the article “Fed Leaves Interest Rates Unchanged” raises a really important problem of the impact of inflation on the national economy and the official policy of the central bank of the country. In such a way, the article reveals the extent to which inflation may define the development of the national economy. At the same time, it also gives hints at the possible ways of the regulation and control over inflation from the part of the Fed though the article seems to be not very opinionated but this is quite normal for articles written in such a style.

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