Ideally, what should be the goal of the Federal Reserves monetary policy?
The Federal Reserve’s monetary policy should support a growing economy but should not adversely affect the general level of prices. Put another way, the Federal Reserve should constantly strive to maintain an amount of money and credit that meet the economy’s need for cash and credit, but at levels that do not cause inflation. Q: What influence do foreign oil producers have on U.S. inflation? A: The inflation rate can respond quickly to changes in the price of materials that are widely used in the economy. Because American consumers use a great volume of petroleum-derived goods, oil qualifies as such a material. The production policies of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC producers that follow OPEC’s lead can significantly affect overall prices in the short-term. Many people remember how much inflation rose during the oil boycott of the early 1970s, when the CPI hit double-digit levels several times. OPEC production policies, however, have short-term
