20090721_mprfullreport

20090721_mprfullreport - For use at 10:00 a.m., EDT July...

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Monetary Policy Report to the Congress July 21, 2009 For use at 10:00 a.m., EDT July 21, 2009 Board of Governors of the Federal Reserve System
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Board of Governors of the Federal Reserve System Monetary Policy Report to the Congress Submitted pursuant to section 2B of the Federal Reserve Act July 21, 2009
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Letter of Transmittal B OARD OF G OVERNORS OF THE F EDERAL R ESERVE S YSTEM Washington, D.C., July 21, 2009 T HE P RESIDENT OF THE S ENATE T HE S PEAKER OF THE H OUSE OF R EPRESENTATIVES The Board of Governors is pleased to submit its Monetary Policy Report to the Congress pursuant to section 2B of the Federal Reserve Act. Sincerely, Ben Bernanke, Chairman
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v Contents Part 1 1 Overview: Monetary Policy and the Economic Outlook Part 2 3 Recent Financial and Economic Developments 4 DOMESTIC DEVELOPMENTS 4 The Household Sector 4 Residential Investment and Housing Finance 6 Consumer Spending and Household Finance 8 The Business Sector 8 Fixed Investment 9 Inventory Investment 9 Corporate Profi ts and Business Finance 10 The Government Sector 10 Federal Government 12 Federal Borrowing 12 State and Local Government 13 State and Local Government Borrowing 13 The External Sector 14 National Saving 15 The Labor Market 15 Employment and Unemployment 16 Productivity and Labor Compensation 17 Prices 18 FINANCIAL STABILITY DEVELOPMENTS 18 Evolution of the Financial Turmoil, Policy Actions, and the Market Response 23 Banking Institutions 24 Monetary Policy Expectations and Treasury Rates 25 Monetary Aggregates and the Federal Reserve’s Balance Sheet
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vi 26 INTERNATIONAL DEVELOPMENTS 26 International Financial Markets 28 The Financial Account 29 Advanced Foreign Economies 30 Emerging Market Economies Part 3 31 Monetary Policy: Recent Developments and Outlook 31 Monetary Policy over the First Half of 2009 34 Monetary Policy as the Economy Recovers Part 4 39 Summary of Economic Projections 41 The Outlook 42 Uncertainty and Risks 43 Diversity of Views 49 Abbreviations Boxes 22 Capital Assistance Program and Supervisory Capital Assessment Program 35 Federal Reserve Initiatives to Increase Transparency 37 Foreign Experience with Interest on Reserves 48 Forecast Uncertainty
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1 Part 1 Overview: Monetary Policy and the Economic Outlook Amid a severe global economic downturn, the U.S. economy contracted further and labor market conditions worsened over the fi rst half of 2009. In the early part of the year, economic activity deteriorated sharply, and strains in fi nancial markets and pressures on fi nancial institutions generally intensifi ed. More recently, how- ever, the downturn in economic activity appears to be abating and fi nancial conditions have eased somewhat, developments that partly refl ect the broad range of policy actions that have been taken to address the crisis.
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This note was uploaded on 08/07/2011 for the course ACCT 300 taught by Professor Professormiller during the Spring '10 term at Kaplan University.

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20090721_mprfullreport - For use at 10:00 a.m., EDT July...

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