The Federal Reserve Board of Governors has decided to ease monetary conditions t

Question

The Federal Reserve Board of Governors has decided to ease monetary conditions to counter early signs of an economic downturn. Because price inflation has been a burden in recent years, the Board is eager to avoid any action that the public might interpret as a return to inflationary conditions. How might the Board use its power to accomplish the objective of monetary ease without drawing unfavorable publicity to its actions?

In your post, ensure that you clearly identify and comment on a suitable resolution to achieve the objective of monetary ease. The quality of your submissions is a critical element in the evaluation process.

Explanation / Answer

Monetory Ease without drawing unfavourable publicity would admittedly be difficult in these modern times. Professional Fed Watchers detect the slightest action and often imagined actions by Board. The action least subject to immediate observation would be open market operations. To do so, bank resserves would be increased through the purchase of government obligations from dealers.

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