On June 19th, the Federal Reserve Board and Federal Open Market Committee (FOMC) released details of the monetary policy action to intervene the economy. What the FOMC promises to seek are price stability and continued rise in employment. Expectations are that the economy will continue to grow and the unemployment rate will decrease. Nevertheless, the Committee is aware of the actual risk that the economy and the reduction in the labor market presents.
Unemployment: the expectation is that the employment will increase; to assure that this will happen the Committee posture is to keep an accommodative monetary policy for supporting the economic recovery. Inflation: In advance, the FOMC knows that inflation will be no greater than or equal to 2%. But to assure that in the future the inflation rate will be steadier the FOMC has decided to continue purchasing forty billion each month of additional agency mortgage-backed securities and forty-five billion each month of longer-term Treasury securities, and to keep the actual policy for reinvestments.
The committee hopes that these measures will keep “downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative”. Analysis The organization that I chose is a Nonprofit Organization in which I was working some time ago; its name is “Franciscan Outreach Association” (FOA) and its primary focus is on serving the poor providing a variety of services. The FOA’s revenues come from individual donations, will and bequest, private grants, Government grants, fundraising events, and other occasional donations.
Services offered by the FOA are: o Overnight shelter: the FOA has two shelters, one that is located in Harrison which has 257 beds and another shelter called the annex which has 65 beds. These shelters have separate dormitories for women and men and it is open during all year around; operating on a first-come/first serve basis. o Soup kitchen: where every night of the year the FOA volunteers serve nutritious meals to an average of 100 individuals.
Case Management: case managers provide services to clients in helping them to create personal goals, obtaining physical and mental health care and counseling when needed, finding vocational training and jobs, and locating housing. o Interim Housing Programs: these present opportunities for clients to move into permanent housing and begin better lives. How the economic projections released by the Fed and FOMC would likely affect the Franciscan Outreach Association?
If the expectation of the FOMC become true and the employment increases it will affect the FOA in a number of perceivable ways in the long run:
1) Decreased in the number of clients (homeless) who visit the FOA: with an increase in employment, people will have more money to spend, pay their rent, buy food, and pay their taxes; which will decrease the number of people looking for: jobs, housing, shelter, counseling (because of depression or substance addiction), health care, food, and other basic needs such as showers and laundry services.
2) Better allocation of scarce resources: a decrease in the number of clients will allow the FOA provide a better service to clients such as the case managers who will have more time to dedicate personal attention to clients and at the shelter there will be more beds available.
3) Revenues will increase – Expenses will decrease: with an increase in employment individuals will be better off to give donations; corporations (with the increase in consumers demand), and the government (with increase of tax payment from individuals) will be able to approve grants, thus the FOA’s revenue will increase and because of a reduction in clients’ number saving will also increase: for example: it will not be necessary to pay extra hours to case managers. In conclusion, the monetary policy action of the FOMC will most likely affect the FOA and it will be visible in the long run.