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Monetary Policy: money, credit, the Federal Reserve, interest

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The reference organization is Wal-Mart.

Please address the following questions:

1. To what extent is Wal-Mart's financial health affected by the Fed's policy on money and interest rates? What aspects of Fed actions affects Wal-Mart the most?

2. If inflation increases and the Fed acts to lower it, explain how the Open Market Committee might do that and then how such action(s) might have either positive or negative effects on Wal-Mart.

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Solution Summary

This job encompasses investment and trade finance issues within the organization of Wal-Mart.

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1. Any company's financial health is affected by what happens in the financial markets, and Fed's policy on money and interest rates are one of the prime drivers of financial markets. Take just two examples: consumption and investment.

When I say consumption I mean what the consumers are buying. For a company like Walmart the behavior of the consumers ends up determining their profit margin. When the Fed decides to increase money supply, or to lower interest rates, consumers are more likely to spend money, and that helps a retail giant like Walmart. On the other hand, if the Fed tightens monetary policy, consumers are more likely to cut down ...

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