Table 1: Effect of Monetary Policies on U.S. Macroeconomic situation from 2000 to 2010
|Period in Years||Fed Rates, Reserve Rates and Open market operations|
|2000||– Raised rates to 5.5% from 5.0% which resulted into decreased inflation to 2.7%, increased GDP to 4.7% and contributed to unemployment of 6%.|
|2001||– Fed rates were l
– owered to combat recession that resulted from the Afghanistan war and confront the effects of the September 2011 attacks.
– Increased open market operation resulting into induced funds into the economy.
– Reserve rates were reduced leading to increasing borrowing.
|2002||– Reduced rates to 1.25% leading to increased prices in treasury bonds, increase in growth of productivity and falling in stock prices.
– Increased GDP growth to 1.8%
– Unemployment remained unchanged at 6% while inflation increased to 2.4%.
|2003||– Reduced rates to 1.25% leading to increased prices in treasury bonds, increase in growth of productivity and falling in stock prices.|
|2004||– Sustained rates to 1.25%. Reduced the subprime mortgage crisis
– Helped stimulate economic growth through funding, contributing to growth in GDP.
|2005||– Raised rates. Resulted into reduced borrowing.
– Led to reduced inflation rate to 3.4%.
– GDP growth increased to 3.3%.
|2006||– Raised rates to 5.25%. Helped combat housing bubble.
– Led to reduced borrowing.
– Unemployment remained at 6%.
– GDP growth rate reduced to 2.4%
|2007||– Reduced rates to 4.25%. Led to reduced housing sells. Increased inter-bank rates on loans.|
|2008||– Reduced rates to 0.25%. Led to tax rebate and increased borrowing.
– Inflation was reduced to 0.1% and led to increased GDP from -0.3% to 2%.
– Unemployment remained unchanged at 6%.
|2009||– Reduced rates to 0.25%. Led to tax rebate and increased borrowing.
– Employment increased to 12%, unemployment remained constant at 6%.
|2010||– Reduced rates to 0.25%. Led to tax rebate and increased borrowing.|
Source: Federalreserve.gov. (2017).
Federalreserve.gov. (2017). Monetary policies. Retrieved from: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.html