Research and Analytics
Research and Analytics
In the second part of two articles, Abdulmajid discusses the global effects of aggressive monetary policy, in Africa, the EU, and the United States. In addition, He highlights a few analyst recommendations and the potential repercussions of those recommendations.
The Federal Reserve Bank of the United States of America, also referred to as “The Federal Reserve” or “The Fed” or “The U.S. Fed,” has an almost monopolistic influence on the functioning and operation of global economies. Due to the U.S. dollar’s status as the World Reserve Currency (WRC) and the currency of choice (or circumstance) for international trade and commerce. The Federal Reserve, which is the apex bank of the world’s largest economy, serves almost as the de facto central bank for the rest of the world, and as such, decisions made within its walls ripple through the halls of other central banks and international/continental financial institutions.
In the first of two pieces on this subject, I will make an effort to present a clear and short explanation of what monetary policy is, how the Federal Reserve has worked to rein in inflation in a manner that is consistent with the objectives that it has articulated, and how inflation is proving to be structural in the economies of the United States and the rest of the world.
Prior to its failure, FRB was a California-based lender that served wealthy Americans with low-rate mortgages in exchange for cash, much as SVB, which catered to technology firms. However, things changed when the Federal Reserve (the Fed), started raising the benchmark interest rate in 2022 in response to escalating inflationary pressures in the world’s largest economy. Notably, the Fed increased the key policy rate by a cumulative 425bps in 2022, with rates now at their highest level since 2008. FRB’s assets suffered losses as a result, as did customer deposits, and the bank’s reputation was damaged.
