Evaluating Quantitative Easing: The Importance of Accounting for Forward Guidance
During the COVID-19 pandemic crisis, policymakers used large-scale asset purchases (LSAPs) along with forward guidance about the future path of the federal funds rate to help stabilize financial markets. However, policymakers and economists have yet to reach a consensus on the efficacy of LSAPs in providing accommodation and improving macroeconomic outcomes. Because announced changes in LSAPs often coincide with changes in forward guidance, the market responses to these two tools can be difficult to disentangle and each tool’s efficacy challenging to evaluate.Brent Bundick and A. Lee Smith ...
Reflections on Monetary Policy in 2022
To bring down inflation, the FOMC has been removing monetary policy accommodation in 2022. St. Louis Fed President Jim Bullard reflects on the year.
Measuring the Stance of Monetary Policy on and off the Zero Lower Bound
Taeyoung Doh and Jason Choi propose a new ?shadow? short-term interest rate to measure the stance of policy when the federal funds rate was constrained by the zero lower bound.
In Conversation: Mary C. Daly with UC Berkeley’s Fisher Center for Real Estate & Urban Economics
Presentation at UC Berkeley’s Fisher Center for Real Estate & Urban Economics, Berkeley, California, October 21, 2022, by Mary C. Daly, President and Chief Executive Officer, Federal Reserve Bank of San Francisco.
FOMC Communication Spillovers: Is There a "Call-Out" Effect?
Foreign asset prices may react to FOMC communication that references specific countries, but the effects are minimal.
The Right Tools for Our Time
Remarks at NABE/Bundesbank International Economic Symposium Eltville am Rhein, Germany.
Changes in the Risk-Management Environment for Monetary Policy
In response to the massive challenges presented by the global financial crisis, in late 2007 the Federal Open Market Committee (FOMC) began a series of large reductions in its traditional policy tool, the overnight interest rate in the federal funds market. By December 2008 the Committee had lowered the target to its effective lower bound (ELB) of 0 to 25 basis points.1 Later, in an attempt to provide additional monetary stimulus, the FOMC implemented nontraditional policy tools, such as large-scale asset purchases and forward guidance about how long the fed funds rate would stay at very low ...
Calibrating Policy in an Uncertain Time
Remarks delivered at Salt Lake Chamber, Salt Lake City, UT, April 12, 2023, by Mary C. Daly, President and Chief Executive Officer, Federal Reserve Bank of San Francisco.
What Is the Monetary Standard? The Fed Should Tell Us
The Federal Reserve System (Fed) is a regular feature in the media. When the Fed communicates with the public, its focus is on forward guidance related to monetary policy—specifically, for achieving low unemployment and low inflation. Fed participants on the Federal Open Market Committee (FOMC) convey what they see as the likely path of policy, including changes in the federal funds rate, a standard monetary policy tool. Because financial markets find this information useful, news stories thoroughly cover Fed communication.However, such communication fails to explain the structure of the ...
The Evolution of Disagreement in the Dot Plot
The Summary of Economic Projections offers important insights into the views of Federal Open Market Committee participants. The summary’s “dot plot” charts each participant’s assessment of the appropriate path for monetary policy given their economic outlook. A new index measuring the level of disagreement indicated by the dots shows that disagreement fell during the 2010s expansion, was nearly nonexistent early in the pandemic, and has been increasing recently. Policy disagreement is correlated with disagreement about future inflation, but factors unrelated to disagreement about the ...