The Role of Macroeconomic Discourse in Shaping Inflation Views: Measuring Public Trust in Federal Reserve Policies

Abstract

This study examines the systemic shifts in the complexities and possibilities in enforcing US monetary policy since the 1930s, focusing on the liquidity trap, digital currency, and inflation targeting. This includes a case study of public perception of the effectiveness of the Federal Reserve’s policies and the adjustment of Central Bank Digital Currencies (CBDC) to foundational macroeconomic problems such as managing liquidity and controlling inflation. Data was collected through a quantitative survey of US residents concerning their perceptions of the existence of liquidity traps, support for modifying the inflation-targeting framework, and extending interest rate manipulations in view of digital currencies. To analyze the demographic profile’s impact on economic sentiment, financial literacy, trust in the Federal Reserve, and the interrelations, more complex statistical analyses were employed: Chi-Square tests, T-tests, ANOVA, and regression models. It indicates significant support for the implementation of digital currency, however most concerns still related to privacy, financial stability, and public acceptance. The study also concludes that new financial innovations or changes in existing ones need correction in the inflation targeting strategy. This study contributes to the debate regarding the evolution of monetary policy and the changes it requires in order to address contemporary economic issues.

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