Transcript Boston Federal Reserve

Boston Federal Reserve
The New England District
By: Alan Sanders & Jackson Ta
GDP Growth
Economic Factors
• Housing Sector – Subprime Crisis and
Declining Asset Value
• Fear of Inflation Through High Gas Prices
• Recent Surge in the Unemployment Rate
U.S National Home Price Index
Information Taken From - S&P/Case-Shiller Home price Indices
History of Avg. Home Prices In New England District
Information Taken From - S&P/Case-Shiller Home price Indices
Gas Prices In The U.S & New England District
Information Taken From - www.eia.doe.gov/oil_gas
Historical U.S Inflation Rates
Taken From The Bureau Of Labor Statistics
Unemployment In The U.S
Unemployment Rates in New England District
http://www.frbsf.org/publications/economics/fedviews/Fedviews_slides_June%202008.pdf
Low Correlation between High Oil
Prices and Core Inflation
• High oil prices are unlikely to create higher prices within the
economy.
• The past twenty years indicates a low correlation between oil
prices and the core rate of inflation.
• A rise in oil prices will lead to greater conservation efforts and
slower economic growth. As a result the demand for energy
will decrease.
• High oil prices will also spur technological innovation, and will
drive production of energy substitutes. Therefore the supply
of energy will increase as well.
Core Inflation vs. Gas Prices
Core Inflation
Sources:
http://tonto.eia.doe.gov/dnav/pet/pet_pri_top.asp
http://www.bos.frb.org/economic/neei/neeidata.htm#prices
Gas Prices in Cents
May-08
May-07
May-06
May-05
May-04
May-03
May-02
May-01
May-00
May-99
May-98
May-97
May-96
May-95
May-94
May-93
May-92
May-91
May-90
May-89
400
350
300
250
200
150
100
50
0
May-88
200.00
180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
Mortgage Relief Initiative
• The Federal Reserve Bank of Boston has
partnered with the Massachusetts Bankers
Association in an effort to reduce the impact
of the credit crisis.
• Participating banks are helping eligible
homeowners refinance their loans.
Source: http://www.wickedlocal.com/wakefield/news/x379971261/Mortgage-relief-initiative-expands-and-evolves
Recommendations
• Do Nothing: the economy is experiencing
pains due to increased oil prices, higher
unemployment, and a weakening of the
housing markets. Economics will solve these
problems naturally.
• Eventually tighten the money supply. This will
establish credibility within the financial
markets.
http://www.frbsf.org/publications/economics/fedviews/Fedviews_slides_June%202008.pdf
http://www.frbsf.org/publications/economics/fedviews/Fedviews_slides_June%202008.pdf
Keep an eye on Foreign Central Banks
• International Banks have been tightening their
supply of money.
• The People’s Bank of China recently raised
bank reserve requirements.
• The European Central Bank may be looking to
raise rates in response to the cooled U.S.
market.