Economic Forecasting Essay

Short-term borrowing from the Federal Reserve funds is always increased because of a reduction in the discount rate.   The Federal Reserve System has been consistently reducing the discount rate in recent years, due to which short-term borrowing has been rising so as to maintain liquidity. In the year 2004, short-term borrowing from the Federal Reserve funds equaled $212.132 million, that is, $212132000.   When the discount rate was further reduced, short-term borrowing in 2005 was $290.663 million (or $290663000).   The difference between the short-term borrowings of 2004 and 2005 was $78531000. In the year 2006, short-term borrowing from the Federal Reserve funds increased yet again because of a reduction in the discount rate.   Short-term borrowing in 2006 equaled $245.595 million (or $245595000) (Citigroup Annual Report, 2006).   The difference between the short-term borrowing of 2005 and 2006 was $45068000. So as to predict the short-term borrowing for years 2007 and 2008, we calculate the average difference in short-term borrowings from 2004 to 2006: [78531000 + (-45068000)]/2 = 16731500. In 2007, therefore, short-term borrowing is predicted to be 245595000 + 16731500 = $262326500 (or $262.3265 million).   In 2008, short-term borrowing is predicted to be 262326500 + 16731500 = $279058000 (or $279.058 million). Income tax and Citibank annual income rate Reductions in corporate tax increase the net income of Citibank.   With a reduction in corporate tax from 35 to 30, the net income of the company in the year 2004 amounted to $17,045 million; in the year 2005, it amounted to $24,589 million; and in the year 2006, the net income was $25,538 (Citigroup Annual Report). The net increase in income from 2004 to 2005 was 24,589 – 17,045 = 7544 million $. The net increase in income from 2005 to 2006 was 25,538 – 24,589 = 949 million $. Thus, the average increase in net income = (7455 + 949)/2 = 4202 million $. Without taking into consideration the other variables that may have an influence on net income, we can predict Citibank’s net income in the year 2007 to be 25,538 + 4202 = 29,740 million $.   In the year 2008, the net income of the company – without due consideration of other variables – would be 29,740 + 4202 = 33,942 million $.