Whats Complicating Bernankes Balancing Act Essay

Whats Complicating Bernankes Balancing Act - Essay Example products, but more about the market forces that are determined by overseas. The interdependency can be observed from the increasing trade volume between U.S. and Asia, which has doubled in 10 years. The complication increases the chances that the Fed could make a policy mistake by pushing rates too high or leaving them too low. It could cost the economy deadly if an error is to be corrected later on. (Cooper, 2006) Large countries, like the U.S., used to alter their monetary policies according to the situation of themselves. For example, in the past, the U.S. could keep her inflation rate under control easily and effectively through adjusting the interest rate to a right level. However, in the world of globalization, as the world economies are becoming more interdependent, as supported by the increasing trading volume in the passage, the level of interest rate would also affect the trade deficit issues between the U.S. and other countries as foreign capital is in need to finance the trade deficit.