The prevalence of interest rates could e extremely important for a county from different standpoints and it is more than important for the countries to have a specific amount and trend of interest rate prevalence in total. There are number questions which have been asked in this particular report in total.
Chapter-2: Fed Watching
- Fed Monetary Policy Change
In the United States of America (USA), Fed held responsible for changing and maintaining the prevailing interest rate in a country. The question regarding changing the monetary policy of the country reveals that there are certain things which come under the ambit of changing of monetary policy of a country. Most of the times, monetary policy based decisions depend upon the size of the financial market, along with the economic outlook of the country in total. Apart from this, the essence of borrowings within the country in domestic level is also an important element which deems important as far as changing the monetary policy of a country is concerned. According to the main theme of this report, FED also takes the same provisions and actions into consideration as far as taking and changing the monetary policy of US is concerned.
- Fed’s Monetary Policy and its effects on Carson Performance
Future Performance both in terms of financials and non financials affect a lot due to the changing of monetary policy in particular. Carson’s performance would also effect due to the decisions on the monetary policy in total. Let’s say the current interest rate of the US is 1.5% per year and in the recent monetary policy it increases to a level of 2.5% in total. At the time of new monetary policy, Carson is strategizing to enter in a new project, and it will depend upon the new interest rate, hence the cost of borrowing funds of the company would increase considerably at the end of the day. While making the financial statement of the company, the liability of the company would also increase along with the interest expense provision, which may effect on the bottom line of the company.
- Tight Monetary Policy and Affect on the borrowed Funds
There are basically two different types of monetary policy, which predominantly are tight monetary policy and loose monetary policy. Tight Monetary Policy (TMP) is a policy, in which the rate of interest would e placed at a high place with tighter payback facility and management. Most of the times, it is observed that the tight monetary policy could affect over the amount of funds borrowed at financial institutions by deficit like Carson Company. In tight monetary policy stance and scenario, there are few people and businesses which will not get any sort of effectiveness in total. Credit Risk problem would manage accordingly due to the Tight Monetary Policy in total. Credit Risk would be managed considerably because of tight monetary policy in total.
- Activities of FOMC
FOMC had come up with number of strategies in total merely to enhance the economy of the country as a whole. The minutes of the last FOMC meetings are mentioned below in details
- No company is allowed to compensate any of their employees higher than $ 500,000 in a year
- The tax should be compiled on the level of high initiation
- The monetary policy would be remain low because there is a need to strengthen the power of the economy as well as of the financial institutions as well in total
- Credit Policy should be tight for the companies merely to enhance the level of getting the money back from the borrowers
- Current monetary policy should not be changed and should be remained on the same level of single figure
According to the FOMC websites, it is essential to take these things into consideration for enhancing the productivity of the companies in total and to enhance the productive of the economy in total
- Fed’s Present Policy
FED always deems important and favorable as far as enhancing the economy of a country is concerned. The current FED policy focus more on the stimulating the economy in total and it also reduced the inflation as well. FED is very much effective in stimulating the economy in total. Financial Institutions would certainly enhance the productivity of the companies as a whole. With the help of new monetary policy, the financial institutions could get certain added advantage because it will increase the financial competitiveness of the companies as well. It will also increase the flow and amounts of the companies which may increase the borrowing levels accordingly and effectively.
- Federal Funds 20 Quarters
The interest rate table of last 20 quarters is mentioned below in the table with graph of the same,
It is found that most of the time the interest rate of the US treasury stagnates accordingly. According to the regression equation, the forecasted interest rate would be 0.78% in the next couple of quarter, which would be effective for the businesses in US. The US Treasury bill rate would also be near to the same thing in total.