Search Results
Journal Article
Capital Flows and Monetary Policy in Emerging Markets around Fed Tightening Cycles
The Federal Reserve’s interest rate hikes in 2022–23 raised concerns about spillover effects on smaller emerging market and developing economies. Historically, a higher U.S. federal funds rate has been associated with international investors withdrawing capital from emerging markets, which can lead to lower economic activity and depreciating exchange rates in these markets—and, in turn, greater financial vulnerability. To reduce capital outflows, central banks in emerging markets can tighten their own monetary policy rates to increase yields on debt securities. But raising interest ...
Working Paper
The Dynamics of Ample Reserves
How monetary policy is implemented can have significant implications for the dynamics of the central bank’s balance sheet. If liquid deposits increase the demand for reserves (Lopez-Salido and Vissing-Jorgensen 2025), then the “ample” level of reserves needed to close the spread between the policy rate and interest on reserves is itself a function of liquid deposits. The supply of reserves will continue to normalize after first reaching ample levels and until liquid deposits return to trend as well. Furthermore, if the supply of reserves encourages deposit creation (Acharya et al. ...
Discussion Paper
How Do Survey- and Market-Based Expectations of the Policy Rate Differ?
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 ...
Journal Article
Is Monetary Policy Sufficiently Restrictive?
St. Louis Fed President Jim Bullard examines whether the policy rate could be considered sufficiently restrictive to return inflation to 2% over time.
Speech
Bullard Discusses U.S. Monetary Policy with CNBC
St. Louis Fed President Jim Bullard discussed inflation, the tapering of the Fed’s asset purchases, and his projections for the policy rate in 2022 during an interview on CNBC’s Squawk Box Europe. The interview was recorded Nov. 9.
Journal Article
How Do Financial Markets Perceive the Balance of Risks to the Policy Rate?
We introduce a new measure of policy rate skew that uses interest rate options prices to summarize market-perceived risks to future short-term interest rates. A positive value of policy rate skew indicates financial markets believe interest rates are more likely to end up higher than projected, whereas a negative value suggests rates could end up lower than projected. As of October 2024, our measure of policy rate skew is near zero, suggesting market-perceived risks to the interest rate outlook are roughly in balance.
Speech
Bullard Talks about Policy Rate and “Soft Landing” Prospects with Wall Street Journal
St. Louis Fed President Jim Bullard discussed his expectations for the policy rate and inflation and the prospects for a “soft landing” for the U.S. economy in a live interview with The Wall Street Journal.Bullard said that his policy rate projection included in the FOMC’s December Summary of Economic Projections, or SEP, was for a target range of 5.25% to 5.5% at the end of 2023, which is slightly higher than the median projection. He cautioned that it’s not certain where the economy or inflation will be then.“The underlying judgment on my part is that inflation will probably ...
Gauging the Fed’s Current Tightening Actions: A Historical Perspective
In 2022, the Fed started its current tightening cycle. How does it compare with other cycles in the past 40 years in terms of the magnitude of policy rate hikes?
Discussion Paper
Reconciling Survey- and Market-Based Expectations for the Policy Rate
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 ...
Speech
Bullard Discusses Policy Rate Increases and U.S. Inflation
St. Louis Fed President Jim Bullard discussed the pace of increases in the Fed’s policy rate and the impact on inflation. He made the comments during a virtual discussion at an HSBC Global Emerging Markets Forum.Bullard said the U.S. inflation rate was way above the Federal Open Market Committee’s 2% target, which is why the FOMC has moved aggressively to raise its policy rate. He also pointed to forecasts made by FOMC members in September’s Summary of Economic Projections that suggest additional moves in the policy rate this year.“We’re hopeful that by acting sooner and with ...