Ben Bernanke, the chairman of the US Federal Reserve from 2006 to 2014 stated in the year 2015 on October 4 that for the first time the federal reserve has taken the decision to raise from 'zero interest rate' and the decision was taken after the great depression. When the markets crashed in the year 2008 then the monetary policy of the federal reserve saved the economy to recover from the recession. However there are other criticisms that the 'zero interest rate' policy of the federal reserve was the reason of the Great Depression of 2008. But Bernanke argued that the fed is not wrong and in coming year it is seen that the economy recovered so the fed did no mistake. During recession there was proposal of implementing fiscal policy another method to recover the economy . The politician agreed to it as tax rates increased but that is not the only way to save the economy. Though Fed cannot control the economic fluctuations and cannot predict accurately what will happen in future. But to fight the recession Fed opted for the strategies that provided better employment opportunities and reduced the unemployment rate. Monetary policy helped in achieving better employment as increasing tax rates increased and it created difficulties for the job holders and the investors . Another policy adopted by the Fed is lowering of interest rate by setting a target of 2 % so that customers invest more in the country and the economy grows. historical data showed that after implementation of the policies the employment rate of the present situation is better than the period of recession.
Bernanke has also compared with the economic performance of Europe in comparison to US. As Fed undertook the policy of quantitative easing ,the US economic performed better than the European economy even though European Central bank(ECB) has more control over the European nations than the Fed has over US. Though European economy is recovering by implementing the policy of quantitative easing but will take more time to recover .The US economy has recovered from the recession and is moving towards full employment with reduced inflation . The prime goal of the fed was and is to achieve better economic growth. The goal cannot be achieved only with monetary policy but also with fiscal policy. So the government has to come up with new policies to have more capital investment , better productivity and full employment
The above graph shows the reduced interest rate policy of the Federal Reserve for a period of 20 years. From 2009 the fed adopted the policy of zero interest rate.
Work Cited
Thoma, Mark. "Economist's View: Fed Watch". Economistsview.typepad.com. N.p., 2014. Web. 30 May 2016.
Bernanke, Ben. "How The Fed Saved The Economy". The Wall Street Journal. N.p., 2015. Web. 30 May 2016.
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