Yes, I totally agree with the author of the text here. It is true that the FED tries its best to protect the economy and the investors from being dipped in the problem (Belvedere, 2016). As the motive of the investor is different, the work and information by the Fed is also understood and used in a different way. The difference in the investor’s motive will make the same information useful for some group while another group will complain about the work of Fed. For example, if some investors are speculating for the profit from the investment when the interest rate fall, then the increase in interest rate will negatively affect them, and they curse while other group looking to earn a profit with the interest rise will be happy. No matter what, the work of the Fed is always driven by the motive to protect the economy first and then protect the largest group of investors. The whole group of investors cannot be made happy in any way at the same time. This is proved by several activities done by the Fed in the past. The problem arises when the public overreacts to the words delivered by the Fed. It is the inability of an individual to take and process the information given by the Fed as per the need (Chandler, 2015).
It is also equally true that monetary policy largely impacts the interest rate. There are two types of monetary policy viz. expansionary and contractionary policy. The expansionary policy increases the money supply thereby decreasing the interest rate as well as increasing the inflation ("Expansionary vs. Contractionary Monetary Policy - Finance Train," n.d.). On the one side of expansionary policy, the inflation increases while on the other side, the lending and investment increases because of the lower interest rate. This will increase the economic activity leading to the growth of the economy, but the increasing inflation affects the lives of the public. On contrary to this, the contractionary policy reduces the money supply as a result of which the inflation decreases making the life of the people easier while it increases the interest rate ("Monetary policy: Can the Fed offset contractionary fiscal policy? | The Economist," 2013). The increment in the interest rate will hamper the borrowing and investment as a result of which the economic growth is hampered. Hence, there is a difficulty in balancing between these two types. However, the Fed has been taking wise decisions to maintain the balance between these two. While maintaining the economic growth, it is difficult to maintain the lower inflation. The Fed takes this issue seriously and has been working to maintain the economic growth and maintaining the inflation to the minimum possible level.
References
Belvedere, M. J. (2016, January 21). Morgan Stanley CEO: Markets are overreacting, Fed could hike more. Retrieved from http://www.cnbc.com/2016/01/21/morgan-stanley-ceo-markets-are-overreacting-fed-could-hike-more.html
Chandler, M. (2015, February 25). Market Participants Overreact to Fed Chair Yellen's Testimony | Economy Watch. Retrieved from http://www.economywatch.com/features/Market-Participants-Overreact-to-Fed-Chair-Yellens-Testimony.02-25-15.html
Expansionary vs. Contractionary Monetary Policy - Finance Train. (n.d.). Retrieved from http://financetrain.com/expansionary-vs-contractionary-monetary-policy/
Monetary policy: Can the Fed offset contractionary fiscal policy? | The Economist. (2013, April). Retrieved from http://www.economist.com/blogs/freeexchange/2013/04/monetary-policy-3
