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Economic Review
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| Progress Toward Price Stability: A Report Card for 1994 By George A. Kahn The Federal Reserve tightened monetary policy six times in 1994. The purpose of these policy moves was to encourage sustainable, noninflationary economic growth. Early actions were taken to move monetary policy toward a less accommodative stance than was followed in 1993. Later actions were taken "against the backdrop of continuing strength in the economic expansion and high levels of resource utilization." These later actions were intended "to keep inflationary pressures contained, and thereby foster sustainable economic growth." All of the actions were in keeping with the Federal Reserve's long-run goal of price stability, which is the key contribution the Federal Reserve can make toward maximizing long-run growth and living standards in the United States. Kahn examines the behavior of inflation in 1994 in relation to the Federal Reserve's goal of achieving price stability over time. The article is the second in an annual series assessing the Federal Reserve's progress toward achieving price stability. Back to top Economic Review home The U.S. Economy: A Look Ahead In a speech made to the Missouri Bankers Association in January of this year, President Hoenig of the Federal Reserve Bank of Kansas City was optimistic about our economy's future. The strong performance of the U.S. economy in 1994 is likely to continue in 1995, but at a more moderate and sustainable pace. The long-run outlook for the economy is also very positive. Achieving our economy's full potential in the coming years, however, should not be taken for granted. Rather, it will depend on how successful we are in promoting open international markets, encouraging savings and investment, and maintaining a healthy financial system. And, most importantly, achieving sustainable economic growth in the future will depend crucially on our ability to foster and maintain price stability over time. Back to top Economic Review home The Role of Monetary Policy:
Where Does Unemployment Fit In? Unemployment is one of the biggest problems facing most OECD countries, and there are strong demands on policymakers to provide solutions. But responsible policymakers must recognize there are clear limits to what monetary policy can do to help lower unemployment. Monetary policy does have an important part to play, butit is not a tool we should use directly to stimulate growth or employment. The best contribution monetary policy can make to growth and employment is to maintain stability in the general level of prices. In remarks made before the Federal Reserve Bank of Kansas City's 1994 symposium, "Reducing Unemployment: Current Issues and Policy Options," Governor Brash of the Reserve Bank of New Zealand gave his insights into the way this issue has developed in New Zealand and how the Reserve Bank has responded. Back to top Economic Review home U.S. Agriculture: Review and
Prospects An old maxim holds that too much of a good thing can be bad for your health. That maxim pretty well sums up U.S. agriculture's predicament in 1994. The nation's crop producers produced record harvests and livestock producers sent record amounts of meat to the nation's meat counters. The abundance of food, however, brought the industry back to its traditional problem--record supplies bring low prices. Hence, farm income declined in 1994. Fortunately, most farmers and ranchers had healthy balance sheets to cushion the fall. Drabenstott and Barkema review the farm economy in 1994 and consider the outlook for 1995. The farm economy should stabilize. While crop prices will probably stay low, export markets should lend some support to crop prices as recovering economies in Europe and Asia boost world food demand. Also, relatively low feed prices will brighten livestock prospects, particularly if cattle and hog prices continue to recover from 1994 lows. A new farm bill will be written in 1995 and, while the new bill will have little if any effect on the farm economy in 1995, the major overhaul of farm programs that now seems possible will have a lasting impact in years to come. Back to top Economic Review home A Healthy Tenth District Economy The Tenth District economy continued to expand at a healthy pace during 1994. A rebound in the region's manufacturing sector joined forces with a booming construction sector and steady growth in services to boost economic growth in the region. While the strength in the district economy was spread across most sectors, mining remained relatively flat and agriculture was weaker. Smith reviews the district's economic performance in 1994 and explores the outlook for 1995. In the year ahead, the district economy will probably slow somewhat as the national economy slows. District manufacturing may continue to improve, but construction is expected to slow from its recent vigorous pace. The region's key natural resource industries--agriculture and energy--are unlikely to bring much new economic activity to the region in the year ahead. Overall, the district economy is expected to grow moderately in 1995. |