Impact of Monetary Policy on Netflix

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Monetary Policy

Monetary policy refers to those actions taken by the Federal Reserve, affecting interest rates, the exchange rate and the money supply, in order to influence the pace of spending and, by that, inflation. Over the centuries, the invention of money has hugely increased the ability of people to concentrate their energies on the things they do best, and then to trade the surpluses created, markedly increasing the living standards of everyone involved. Monetary policy helps the governing body to ensure that the total amount of money available in the community is kept consistent with the total volume of goods and services produced in that community. If this is not done then the buying power of money goes either down or up, which results in inflation or deflation.

Federal Funds Interest Rate and Exchange Rate are the most commonly used economic indicators to analyze the importance of monetary policy decisions. Over the recent past, the Federal Reserve has been raising interest rates continuously to control the money in the economy that is improving after the 2001 recession. An economic indicator is a statistic which indicates how well the economy is doing and how well the economy is going to do in the future. The market analysts and investors use the various economic indicators to make decisions. If a set of economic indicators suggest that the economy is going to do better or worse in the future than they had previously expected, they may decide to change their investing strategy. This would impact directly on the share price of Netflix. Increasing interest rates mean that the money used in the economy is decreasing and this may affect the way the existing and potential Netflix customers would want to spend their money for entertainment. Since interest rates would directly affect inflation, if inflation increases, the base-price offering for Netflix customers will change and it may also impact the rate at which new customers sign-up for Netflix

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