Deflation or inflation, reaction of the federal reserve

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Are we heading for deflation or inflation?
The Federal Reserve wants higher inflation, they use the method of quantative easing.

Published in: Economy & Finance, Technology
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Deflation or inflation, reaction of the federal reserve

  1. 1. DEFLATION OR INFLATION? REACTION OF THE FEDERAL RESERVE Marie Peene
  2. 2. Overview  Situation of the Investors  Strategy of the Federal Reserve  Current situation and the future expectations
  3. 3. Situation of the investors  Torn between two extremes:  Deflation  A decline in the general price level  Inflation  An increase in the general price level
  4. 4. 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”
  5. 5. Situation of the investors  Main problem:  Difficult to jump quickly from one extreme to another  Investors need to stay flexible
  6. 6. Strategy of the Federal Reserve  The federal Reserve = ‘the Fed’  Chairman = Ben Bernanke  First concern deflation  Now concerned about continuing low inflation
  7. 7. 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
  8. 8. Current situation  Optimistic  Small recovery  600 billion dollars  Pushed the dollar lower  Driven up the price of commodities  Second round of quantitative easing
  9. 9. Conclusion  A lot of efforts to help and boost the economy  Still uncertainty about the future of the economy
  10. 10. Thank you for watching Marie Peene

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