Search Results
Journal Article
Publishing FOMC economic forecasts
Given the time lag between a monetary policy action and its effect on the economy, the importance of considering economic forecasts in the conduct of policy has long been acknowledged. Still, it is only over the past decade or so that the publication of central bank economic forecasts has been widely recognized as a potentially useful tool for monetary policy communication. As a result, many central banks have begun to express their views about the likely future path of the economy more openly (in line with a general trend toward greater central bank transparency). ; Last November, the ...
Journal Article
Climate Change and the Federal Reserve
Climate change describes the current trend toward higher average global temperatures and accompanying environmental shifts such as rising sea levels and more severe storms, floods, droughts, and heat waves. In coming decades, climate change?and efforts to limit that change and adapt to it?will have increasingly important effects on the U.S. economy. These effects and their associated risks are relevant considerations for the Federal Reserve in fulfilling its mandate for macroeconomic and financial stability.
Conference Paper
Inflation expectations and risk premiums in an arbitrage-free model of nominal and real bond yields
Differences between yields on comparable-maturity U.S. Treasury nominal and real debt, the so-called breakeven inflation (BEI) rates, are widely used indicators of inflation expectations. However, better measures of inflation expectations could be obtained by subtracting inflation risk premiums from the BEI rates. We provide such decompositions using an estimated affine arbitrage-free model of the term structure that captures the pricing of both nominal and real Treasury securities. Our empirical results suggest that long-term inflation expectations have been well anchored over the past few ...
Journal Article
Inflation: mind the gap
This Economic Letter examines recent evidence concerning the connection between unemployment and inflation. We argue that, in a deep economic downturn such as the current one, inflation and unemployment do tend to move together in a manner consistent with the Phillips curve. But, outside of such severe recessions, fluctuations in the inflation and unemployment rates do not line up particularly well. Inflation appears to be buffeted by many other factors. This explains why some studies find only a "loose empirical relationship" between economic slack and inflation. Thus, compared with the ...
Journal Article
U.S. inflation targeting: pro and con
Journal Article
Optimal policy and market-based expectations
Financial market prices contain valuable information about investors? views regarding future interest rates, inflation, and other economic variables. However, such market-based expectations can be hard to interpret because changes in risk and liquidity premiums also affect asset prices. In practice, policymakers should be cautious in relying on the expectations information in market prices.
Journal Article
Has a recession already started?
Journal Article
The goals of U.S. monetary policy
Journal Article
Monetary policy inertia and recent Fed actions
In the latest episode of monetary tightening in the United States, the Federal Open Market Committee (FOMC), which sets U.S. monetary policy, raised the target level of its key policy interest rate, the federal funds rate, from 1% in June 2004 to 5-1/4% in June 2006. This gradual increase was accomplished via a sequence of 17 consecutive 25-basis-point increases at successive FOMC meetings. This slow, steady two-year adjustment of the policy rate can be given two different interpretations. One of these is that the gradual nature of the policy adjustment reflected a slow internal response by ...