Discussion Paper
How Do Survey- and Market-Based Expectations of the Policy Rate Differ?
Morse, Ari; Fiorica, Joseph; Brodsky, Bonni; Rodrigues, Anthony P.; LeSueur, Eric; Del Negro, Marco (2016-04-07)
Over the past year, market pricing on interest rate derivatives linked to the federal funds rate has suggested a significantly lower expected path of the policy rate than responses to the New York Fed’s Survey of Primary Dealers (SPD) and Survey of Market Participants (SMP). However, this gap narrowed considerably from December 2015 to January 2016, before widening slightly at longer horizons in March. This post argues that the narrowing between December and January was mostly the result of survey respondents placing greater weight on lower rate outcomes, while the subsequent widening ...
Liberty Street Economics , Paper 20160407

Working Paper
The Federal Reserve's balance sheet and overnight interest rates
Morse, Ari; Marquez, Jaime R.; Schlusche, Bernd (2012)
This paper provides a comprehensive study of the interplay between the Federal Reserve's balance sheet and overnight interest rates. We model both the supply of and the demand for excess reserves, treating assets of the Federal Reserve as policy tools, and estimate the effects of conventional and unconventional monetary policy on overnight funding rates. We find that, in the current environment with quite elevated levels of reserves, the effect of further monetary policy accommodation on overnight interest rates is limited. Further, assuming a path for removing monetary policy accommodation ...
Finance and Economics Discussion Series , Paper 2012-66

Discussion Paper
Reconciling Survey- and Market-Based Expectations for the Policy Rate
Morse, Ari; Fiorica, Joseph; Brodsky, Bonni; Rodrigues, Anthony P.; Del Negro, Marco; LeSueur, Eric (2016-04-08)
In our previous post, we showed that the gap between the market-implied path for the federal funds rate and the survey-implied mean expectations for the federal funds rate from the Survey of Primary Dealers (SPD) and the Survey of Market Participants (SMP) narrowed from the December survey to the January survey. In particular, we provided explanations for this narrowing as well as for the subsequent widening from January to March. This post continues the discussion by presenting a novel approach called ?tilting? that yields insights by measuring how much the survey probability distributions ...
Liberty Street Economics , Paper 20160408