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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 ...
Speech
Bullard Discusses Policy Rate Increases and His Views of U.S. Recession Predictions
St. Louis Fed President Jim Bullard talked about his preferences for raising the policy rate and his views of recession predictions in remarks during a European Economics and Financial Centre virtual discussion.Bullard said the U.S. economy continues to do very well and that the country has created about 2.7 million jobs in the first six months of the year, “an outstanding number even for a full year.”Although financial markets have been predicting a U.S. recession next year, Bullard said he is “a little skeptical that we’ll get to a recession.” The U.S. economy is slowing, but ...
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.
Discussion Paper
How Much Is Priced In? Market Expectations for FOMC Rate Hikes from Different Angles
It is essential for policymakers and financial market participants to understand market expectations for the path of future policy rates because these expectations can have important implications for financial markets and the broader economy. In this post?which is meant to complement prior Liberty Street Economics posts, including Crump et al. (2014a, 2014b ) and Brodsky et al. (2016a, 2016b)?we offer some insights into estimating and interpreting market expectations for increases in the federal funds target range at upcoming meetings of the Federal Open Market Committee (FOMC).
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?
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 ...
Speech
Bullard Discusses Interest Rates and Containing Inflation with MarketWatch
In an interview with MarketWatch during a Barron’s Live event, St. Louis Fed President Jim Bullard talked about the level of the policy rate needed to put sufficient downward pressure on inflation.Citing his Nov. 17 presentation to Greater Louisville Inc., Bullard reiterated that the policy rate would need to reach at least the bottom end of a 5% to 7% range to be sufficiently restrictive, given the data the Federal Open Market Committee has today.“I also think that we’re going to have to continue to pursue our interest rate increases into 2023, and there’s some risk that we’ll have ...
Speech
Bullard Discusses Inflation and His Views on the Policy Rate with Yahoo Finance
St. Louis Fed President Jim Bullard shared his views on the latest inflation data and Fed action needed to put downward pressure on inflation. During an interview with Yahoo Finance, he also said that the probability of a U.S. recession is not particularly elevated at this time.Asked about the latest CPI report, Bullard said, “my takeaway is that inflation is broader and more persistent than many have thought and that the Fed will have to act in order to keep inflation under control.” He added that the Federal Open Market Committee (FOMC) has a plan in place—a 50-basis-point increase in ...
Output Gaps, the Taylor Rule and the Stance of Monetary Policy
The Taylor rule offers a formula to calculate a prescribed policy rate. How do alternative measures of the output gap affect this prescribed rate?
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 ...