deflation or inflation, reaction of the federal reserve
DESCRIPTION
Are we heading for deflation or inflation? The Federal Reserve wants higher inflation, they use the method of quantative easing.TRANSCRIPT
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DEFLATION OR INFLATION? REACTION OF THE FEDERAL RESERVE
Marie Peene
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Overview
Situation of the Investors
Strategy of the Federal Reserve
Current situation and the future expectations
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Situation of the investors
Torn between two extremes:
Deflation A decline in the general price level
Inflation An increase in the general price level
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Situation of the investors
Deflation or inflation?
Economists: Deflation risks > Inflation risks Analyzing the economy in Japan:
Stagnation + years of falling prices
Is Deflation that bad? “The sun still rises over Tokyo”
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Situation of the investors
Main problem:
Difficult to jump quickly from one extreme to another
Investors need to stay flexible
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Strategy of the Federal Reserve
The federal Reserve = ‘the Fed’ Chairman = Ben Bernanke
First concern deflation Now concerned about continuing low inflation
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Strategy of the Federal Reserve
Boost the economy:
pumping money into the economy
Quantitative easing Monetary policy to increase the supply of money
Higher inflation Quantitative easing
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Current situation
Optimistic Small recovery
600 billion dollars Pushed the dollar lower Driven up the price of commodities
Second round of quantitative easing
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Conclusion
A lot of efforts to help and boost the economy Still uncertainty about the future of the economy
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Thank you for watching
Marie Peene