CASPIANO

TOPICS: Economic Growth, Federal Reserve, Interest Rates, Labor Markets, Monetary Policy
SUMMARY: U.S. Federal Reserve chair Janet Yellen signaled that the central bank is preparing to raise short-term interest rates in the near future, pointing to improving U.S. economic performance this spring. Rate hikes could occur as soon as the Federal Reserve's mid-June meeting, though the global turbulence earlier this year make lead monetary policymakers to move cautiously and wait to raise rates until one of the summer meetings.

Factors that impact the Federal Reserve's interest rate policy decisions. And they can assess the impact of higher interest rates on individual GDP components as well as specific industries.

1. 1. Which interest rate does the Federal Reserve actually set during its policy meetings? What is the current level of this interest rate?

2. 2. When did Federal Reserve chair Janet Yellen say an interest rate increase may be coming, if at all? What are three improvements in the U.S. economy that she wants to see before deciding on increasing interest rates?

3. 3. What are two possible impediments that could convince the Federal Reserve to keep interest rate at their current levels in the coming months?

4. 4. Briefly explain how Federal Reserve's raising of interest rates would affect the following variables: household consumption, private savings, business investment, economic output, and the inflation rate. Be sure to explain the reasons why these variables would be affected. Include a well-labeled figure to show the effects on economic output and price levels.

5. 5. Which U.S. industries would be the most hurt by rising interest rates, and why?

refrence article use this link

http://www.wsj.com/articles/yellen-sees-rate-hike-coming-soon-1464388293