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Journal Article
Fed Communications and Inflation Expectations
Monetary policy surprises—changes in various interest rates around central bank communication events—reflect new information in monetary policy actions and communications. For the Federal Reserve, surprises around Federal Open Market Committee statements and post-meeting press conferences have, in recent years, often led to meaningful market surprises that capture policy news. Event-study analysis provides new market-based evidence of monetary policy transmission: Hawkish policy surprises lower market-based inflation expectations, while dovish surprises raise them, in line with standard ...
Journal Article
Financial Markets, Oil Prices, and Supply-Side Risks
The relation between stocks and bonds indicates whether supply or demand shocks dominate the risks to economic activity. After two decades of concerns primarily about changes in demand, the stock-bond correlation recently flipped, suggesting that the perceived source of risk to the economy has shifted towards supply shocks. Other financial correlations, such as the stock-oil correlation, also changed accordingly and thus agree with this interpretation. In line with this evidence, financial market pricing now indicates that elevated oil prices and potential inflation are prominent sources of ...