U.S Monetary Policy In 1995

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Term Paper Title	U.S Monetary Policy In 1995
# of Words	1337
# of Pages (250 words per page double spaced)	5.35

U.S Monetary Policy in 1995

U.S Monetary Policy in 1995

        When Alan Greenspan presented the Federal Reserve's semi-annual report
on monetary policy to the Subcommittee on Domestic and International Monetary
Policy, the Committee on Banking and Financial Services, and the U.S. House of
Representatives on February, Dr. Greenspan touted a cautionary yet favorable
view of the U.S. economy.  He states that "With inflationary pressures
apparently receding, the previous degree of restraint in monetary policy was no
longer deemed necessary, and the FOMC consequently implemented a small reduction
in reserve market pressures last July."  (Greenspan, 1996, Speech)
        During the Summer and Fall of 1995, the economy experienced a
strengthening of aggregate demand growth.  According to Greenspan, this increase
in aggregate demand  brought finished goods inventories and sales  into near
equilibrium.   The Fed's fine tuning of the economy seemed to be paying off.
Greenspan had a positive outlook for the economy for the rest of 1995.  He
states "the economy, as hoped has moved onto a trajectory that could be
maintained--one less steep than in 1994, when the rate of growth was clearly
unsustainable, but one that nevertheless would imply continued significant
growth and incomes." (Greenspan, 1996, Speech)
     Towards the end of the year, the economy showed signs of slowing.
Fearing a prolonged slowdown or even a recession in the economy, and with
inflationary expectations waning, Chairman Greenspan and the Federal Reserve cut
rates again in December. (Greenspan, 1996, Speech)
     There are, of course, critics of 1995's monetary policy.  Most of the
criticism came in the early part of 1995 when the Fed raised rates again.
     In the article "Are We Losing Altitude Too Fast" from the May 1, 1995
issue of  Time magazine written by John Greenwald, he explains that the economy
might not be coming in for a "soft landing" like the fed predicts.  Trying to
sustain 2 to 3 percent growth might lead us into a recession.  Mr. Greenwald
explains how the Fed's actions in 1994 and early 1995 has hurt individuals and
the economy as a whole.  "Corporate layoffs are far from over," says Greenwald,
"they generally accelerate when firms find themselves in an economy that is
weakening."  (Greenwald, Time, 5/1/95, p80)
     Unemployment and layoffs aren't the only thing to worry about according
to Mr. Greenwald.  The automobile industry and the housing markets are both
getting hit in the pocket b...

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