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

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Deflation or inflation, reaction of the federal reserve

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