Please write an news analysis on the below article:
http://www.forbes.com/sites/currentevents/2014/04/16/monetary-policy-relief-finally-adding-growth/
Please find a sample news analysis as to how it should be done:
The following is how I want you to do the written news analysis assignments.
Please note my summary and analysis below:
An Uneven Fight Against Inflation
By DANIEL ALTMAN – August 28, 2005
This section of the article from the New York Times indicates that inflation is on the rise in most industrialized nations; however, not all central banks are taking steps to stop it. Part of the problem for policy makers is that their measurement for tracking inflation are imprecise and may be misleading. In addition, the article warns that inflation can spiral out of control and the consequences can be very negative. Some of the negative effects discussed are higher interest rates, which can then slow the economy, uncertainty for businesses which may delay investment, and the depreciation of the country’s currency which can raise import prices and escalate inflation further.
The article relates to the chapter on monetary policy and the chapter on inflation. Monetary policy is defined in the text is action by the Federal Reserve Bank, the nation’s central bank, to influence the quantity of money in the economy and interest rates. Inflation is defined as a sustained increase in the price level. The article indicates that inflation, is on the rise. The key measurement used to track inflation in the United States is the Consumer Price Index, as alluded to in the article. This index tracks the prices of some 80,000 products from one year to the next. Because the prices of food and oil fluctuate a lot in the short run, the CPI reports a “core” inflation rate which excludes food and energy and then the regular CPI which includes all products. The problem, as of 2005, has been that the “core” inflation rate has been very low. The implication of that is that the Federal Reserve Bank does not have much to worry about. However, the article argues that perhaps they should be focusing on the regular CPI which indicates that inflation is higher than the “core” reporting indicates.
The article also relates to another concept in the inflation chapter: cost push inflation. This type of inflation occurs when the cost of production increases for all firms. Higher energy prices influence all firms. Firms then pass on these increase in costs to consumers in higher prices. Workers see that the cost of living has risen and demand higher wages. We then get into a “wage-price” cycle—higher prices leading to higher wages leading to higher prices—and then inflation has taken off and it becomes difficult to control.
Rising inflation can have negative effects on the economy. The first of these is higher interest rates. Lenders try to protect themselves from inflation by increasing interest rates. They want to be paid back in more money, because inflation is reducing the purchasing power of the interest income they earn. In addition, the central bank, the Federal Reserve Bank will start to increase interest rates also to reduce spending and thus to lower prices. When interest rates rise, consumers and consumers take out fewer loans and the economy slows. The text indicates that high inflation is often followed by an economic slow- down or recession. A recession occurs when production of output in the economy slows for at least 6 months.
As you can see, the article directly ties in to our chapter on inflation and the discussion of the definition of inflation and the causes of inflation, and, in addition, it ties into the chapter on monetary policy and how the Federal Reserve attempts to control inflation and the factors which may hinder their success.
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