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Speech
Comments on “A Skeptical View of the Impact of the Fed’s Balance Sheet”: remarks at the 2018 U.S. Monetary Policy Forum, New York City
Dudley, William (2018-02-23)
Remarks at the 2018 U.S. Monetary Policy Forum, New York City.
Speech , Paper 275

Working Paper
How Optimal Was U.S. Monetary Policy at the Zero Lower Bound?
Bundick, Brent; Smith, Andrew Lee; Hotz, Logan (2023-12-01)
The zero lower bound on nominal interest rates can generate substantial downward pressure on longer-term inflation expectations. We use data on interest rate options and inflation compensation to estimate how the probability that the zero lower bound will bind in the future has weighed on inflation expectations in the United States. Over the 2008–19 period, we estimate that the zero lower bound imparted only a small drag on longer-term inflation expectations of around 10 basis points. We argue that the Federal Reserve's forward guidance and large-scale asset purchases largely offset the ...
Research Working Paper , Paper RWP 23-14

Report
How to escape a liquidity trap with interest rate rules
Duarte, Fernando M. (2016-02-01)
I study how central banks should communicate monetary policy in liquidity trap scenarios in which the zero lower bound on nominal interest rates is binding. Using a standard New Keynesian model, I argue that the key to anchoring expectations and preventing self-fulfilling deflationary spirals is to promise to keep nominal interest rates pegged at zero for a length of time that depends on the state of the economy. I derive necessary and sufficient conditions for this type of state-contingent forward guidance to implement the welfare-maximizing equilibrium as a globally determinate (that is, ...
Staff Reports , Paper 776

Report
An interest rate rule to uniquely implement the optimal equilibrium in a liquidity trap
Zabai, Anna; Duarte, Fernando M. (2015-10-01)
We propose a new interest rate rule that implements the optimal equilibrium and eliminates all indeterminacy in a canonical New Keynesian model in which the zero lower bound on nominal interest rates (ZLB) is binding. The rule commits to zero nominal interest rates for a length of time that increases in proportion to how much past inflation has deviated?either upward or downward?from its optimal level. Once outside the ZLB, interest rates follow a standard Taylor rule. Following the Taylor principle outside the ZLB is neither necessary nor sufficient to ensure uniqueness of equilibria. ...
Staff Reports , Paper 745

Working Paper
Inflation Disagreement Weakens the Power of Monetary Policy
Dong, Ding; Liu, Zheng; Wang, Pengfei; Wei, Min (2025-05-31)
Household inflation disagreement weakens the impact of forward guidance and monetary policy shocks, especially when inflation forecasts are positively skewed. This attenuation effect is not driven by endogenous responses of inflation disagreement to contemporaneous shocks. A model with heterogeneous beliefs about the central bank’s inflation target explains these observations. Agents expecting higher future inflation perceive lower real interest rates and borrow more, constrained by borrowing limits. Increased inflation disagreement results in more borrowing-constrained agents, leading to ...
Working Paper Series , Paper 2024-27

Journal Article
Monetary Policy Stance Is Tighter than Federal Funds Rate
Choi, Jason; Doh, Taeyoung; Foerster, Andrew; Martinez, Zinnia (2022-11-07)
The Federal Reserve’s use of forward guidance and balance sheet policy means that monetary policy consists of more than changing the federal funds rate target. A proxy federal funds rate that incorporates data from financial markets can help assess the broader stance of monetary policy. This proxy measure shows that, since late 2021, monetary policy has been substantially tighter than the federal funds rate indicates. Tightening financial conditions are similar to what would be expected if the funds rate had exceeded 5¼% by September 2022.
FRBSF Economic Letter , Volume 2022 , Issue 30 , Pages 5

Working Paper
Monetary Policy and Economic Performance Since the Financial Crisis
Gagnon, Etienne; Martinez-Garcia, Enrique; Caldara, Dario; Neely, Christopher J. (2020-08-28)
We review the macroeconomic performance over the period since the Global Financial Crisis and the challenges in the pursuit of the Federal Reserve’s dual mandate. We characterize the use of forward guidance and balance sheet policies after the federal funds rate reached the effective lower bound. We also review the evidence on the efficacy of these tools and consider whether policymakers might have used them more forcefully. Finally, we examine the post-crisis experience of other major central banks with these policy tools.
Globalization Institute Working Papers , Paper 399

Speech
Moving toward 'normal' U.S. monetary policy: remarks at the Joint Bank Indonesia-Federal Reserve Bank of New York Central Banking Forum, Nusa Dua, Indonesia
Williams, John C. (2018-10-10)
Remarks at the Joint Bank Indonesia-Federal Reserve Bank of New York Central Banking Forum, Nusa Dua, Indonesia.
Speech , Paper 296

Working Paper
The Macroeconomic Effects of the Federal Reserve's Unconventional Monetary Policies
Engen, Eric M.; Laubach, Thomas; Reifschneider, David L. (2015-01-14)
After reaching the effective lower bound for the federal funds rate in late 2008, the Federal Reserve turned to two unconventional policy tools--quantitative easing and increasingly explicit and forward-leaning guidance for the future path of the federal funds rate--in order to provide additional monetary policy accommodation. We use survey data from the Blue Chip Economic Indicators to infer changes in private-sector perceptions of the implicit interest rate rule that the Federal Reserve would use following liftoff from the effective lower bound. Using our estimates of the changes over time ...
Finance and Economics Discussion Series , Paper 2015-5

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