1.) How do the policy of the Federal Reserve bank and the Central bank of its key market affect the company’s economic growth?
a. Today’s news will increase pressure on the Federal Reserve, the US central bank, to continue its aggressive monetary tightening policy, including increasing interest rates. Yesterday, the Fed indicated that it was more concerned about not doing enough to head off soaring US inflation, than doing too much.Minutes released from its September 2022 meeting, at which the Fed imposed its third consecutive 0.75 percentage point rate rise, showed that central bankers remained committed to “purposefully” tightening monetary policy in the face of “broad-based and unacceptably high inflation”. US benchmark interest rates currently stand in the range 3% to 3.25%. The Fed’s next rate-setting announcement will be made on 2 November. The Fed’s stated objective is to achieve maximum employment and inflation at the rate of 2% over the long run – the same rate as the Bank of England. The UK’s inflation figure will be announced next Wednesday, 19 October. The Bank of England is scheduled to make its next Bank rate decision on 3 November. Richard Carter, head of fixed interest research at Quilter Cheviot, said: “As was widely expected, today’s US CPI numbers once again showed that inflation is gradually easing on the back of lower gasoline prices, dipping to 8.2% in the 12 months to September compared to 8.3% in August.” He added: “Despite cooling off slightly, inflation remains high and we would therefore expect to see another 0.75% interest rate hike at the next meeting and for the Federal Funds rate to be close to 4.5% by year-end. Investors continue to pray for a Fed pivot, but they may need to be patient.”
2.) Effect of fiscal policies of the home country and two critical markets on the company.
a. fiscal policy turned expansionary in Korea after the onset of the
current crisis. While government expenditure increased by 15% in 2009, revenues increased by only 2% in nominal terms. As a consequence, the consolidated budget balance and operational budget balance of the central government a share of gross domestic product (GDP), were -2.1% and -5%, respectively, in 2009, and they are expected to be -0.4% and -
2.9%, respectively, in 2010. It is widely recognized that the sizeable fiscal stimulus has contributed to Korea’s rapid recovery. For example, the International Monetary Fund (IMF) estimates that the fiscal stimulus added 0.9-2.8 percentage point to baseline GDP growth in the first half of 2009. In this paper, I attempt to summarize fiscal policy developments in Korea since last year and assess how effective fiscal policy has been in curbing the impact of the global crisis. In particular, I conduct an empirical analysis using historical data from the Republic of Korea and other countries and derive stylized patterns on counter-cyclicality of fiscal policy and its role in the recovery process. Using these patterns, I am able to evaluate more accurately Korea’s fiscal response since late 2008. My analysis suggests that Korea’s fiscal stimulus, while having contributed greatly to the economy’s fast recovery, was unusually large compared with fiscal responses during other periods of recession.
References:
https://www.forbes.com/uk/advisor/personal-finance/2022/10/13/inflation-rate-update/
https://www.adb.org/sites/default/files/publication/156080/adbi-wp