Post on 21-Dec-2015
Boston Federal Reserve Boston Federal Reserve The New England District
By: Alan Sanders & Jackson Ta
Economic Factors
• Housing Sector – Subprime Crisis and Declining Asset Value
• Fear of Inflation Through High Gas Prices• Recent Surge in the Unemployment Rate
History of Avg. Home Prices In New England District
Information Taken From - S&P/Case-Shiller Home price Indices
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
0.0020.0040.0060.0080.00
100.00120.00140.00160.00180.00200.00
May
-88
May
-89
May
-90
May
-91
May
-92
May
-93
May
-94
May
-95
May
-96
May
-97
May
-98
May
-99
May
-00
May
-01
May
-02
May
-03
May
-04
May
-05
May
-06
May
-07
May
-08
050100150200250300350400
Core Inflation Gas Prices in Cents
Sources: http://tonto.eia.doe.gov/dnav/pet/pet_pri_top.asphttp://www.bos.frb.org/economic/neei/neeidata.htm#prices
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.