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Journal Article
Understanding the Recent Rise in Municipal Bond Yields
Gulati, Chaitri; Dice, Jacob; Bi, Huixin; Marsh, W. Blake (2020-05-27)
In late March, investors sold off municipal bonds at a rapid pace, depressing municipal bond prices and driving up their yields relative to U.S. Treasuries. We find that this initial investor run on the municipal bond market was likely due to increased liquidity demand rather than credit concerns, making the Federal Reserve’s early actions to relieve liquidity stress effective. Going forward, however, municipal bond prices will likely reflect increased credit concerns.
Economic Bulletin , Issue May 27, 2020 , Pages 4

Journal Article
Bank Profitability Rebounds despite Compressed Interest Margins
Sengupta, Rajdeep; Byrdak, Adam (2021-11-17)
While traditional sources of U.S. bank revenues have struggled during the pandemic, overall bank profitability has soared. This unusual deviation is largely explained by a substantial decline in banks’ loan loss provisions. Extraordinary policy measures undertaken by the Federal Reserve and U.S. Treasury aided a rebound in financial market conditions and, in turn, reduced projected loan losses. However, this effect is likely to be transitory, suggesting an uncertain future for bank profitability.
Economic Bulletin , Issue November 17, 2021

Journal Article
To Improve the Accuracy of GDP Growth Forecasts, Add Financial Market Conditions
Cook, Thomas R.; Doh, Taeyoung (2021-06-02)
More timely data on current macroeconomic conditions can reduce uncertainty about forecasts, helping policymakers mitigate the risk of extreme economic outcomes. We find that incorporating financial market conditions along with current macroeconomic conditions improves the forecast accuracy of future GDP growth. Forecasts based only on current macroeconomic conditions eventually converge to those incorporating financial market conditions, lending further support to this approach.
Economic Bulletin , Issue June 2, 2021 , Pages 5

Journal Article
Not Bullish: U.S. Cattle Herds Hung Up on Higher Interest Expenses
Cowley, Cortney; Kreitman, Ty; Scott, Francisco (2024-03-29)
Cattle inventories declined to historically low levels at the start of 2024. Cattle producers may facechallenges maintaining or restocking herds, as higher interest expenses on cattle and input purchases in2022–23 have constrained profit margins. Although feed costs have decreased slightly, higher costs forfinancing and other operating expenses could continue to put pressure on cattle production andprofitability.
Economic Bulletin

Journal Article
Consumer Debt Is High, but Consumers Seem to Have Room to Run
Brown, Jason; Tousey, Colton (2024-05-17)
Real consumer debt is now higher than its prior peak during the global financial crisis, driven in part by increases in credit card debt. Although the share of credit card debt transitioning into delinquency has risen, it remains below levels seen during the global financial crisis. Moreover, debt-to-income measures remain historically low, suggesting that consumers in aggregate may have more room to run up debt before experiencing further financial stress.
Economic Bulletin

Journal Article
Cell Phone Data Suggest Persistent Differences in Work from Home by Income, Race, and Education during the Pandemic
Kim, Sungil; Cakir Melek, Nida (2021-03-31)
Social-distancing policies to combat the spread of COVID-19 led to an initial spike in work from home. We use high-frequency cell phone geolocation data to assess how work from home has evolved since then. We show that work from home declined as restrictions eased but remains above pre-pandemic levels. In addition, we find that differences across income, race, and education in work from home that emerged with the pandemic persist a year later.
Economic Bulletin , Issue March 31, 2021 , Pages 4

Journal Article
Comparing Measures of Rental Prices Can Inform Monetary Policy
McAdam, Peter (2023-09-29)
Shelter makes up one-third of the Consumer Price Index (CPI) and is important to understanding inflation developments. Comparing two measures of shelter prices—the official U.S. Bureau of Labor Statistics (BLS) dataset and the Zillow rental price index—shows that the Zillow series leads the BLS series by about six to 10 months. Changes in the Zillow series should eventually be reflected in the BLS data, so any positive gap between the two suggests that tighter monetary conditions may be needed to lower CPI inflation.
Economic Bulletin

Journal Article
Why Haven’t Recent Rate Increases Slowed the Economy More? Look to Unusually Low Private-Lending Spreads
Glover, Andrew; Oliyede, Johnson (2024-08-14)
Despite a large and rapid increase in the policy rate since March 2022, economic activity has remained resilient. We argue that private-lending spreads—the difference between the policy rate and rates private-sector borrowers pay—are surprisingly low and a major factor for why rate hikes have not slowed the economy more. If spreads are as insensitive to rate cuts as they are to rate hikes, then they may dampen the effect of expansionary monetary policy.
Economic Bulletin

Journal Article
Assessing Market Conditions ahead of Quantitative Tightening
Sengupta, Rajdeep; Smith, Andrew Lee (2022-07-11)
Quantitative tightening (QT)—the reduction in the Federal Reserve’s balance sheet—will transfer a significant amount of Treasury and agency mortgage-backed securities to investors. This transfer will be larger than the first endeavor with QT in 2017 and will occur at a time when financial markets are strained, suggesting this round of QT has the potential to be more disruptive compared with the benign start to the 2017 runoff.
Economic Bulletin , Issue July 11, 2022 , Pages 4

Journal Article
A Tight Labor Market Could Keep Rent Inflation Elevated
Smith, Andrew Lee; Bundick, Brent (2023-03-01)
Rent inflation responds more to labor market conditions compared with other components of inflation. We attribute this link between labor market tightness and rent inflation to greater demand for rental units afforded by job gains and wage growth. Although online measures of asking rents currently suggest official measures of rent inflation will decline, we caution that rent inflation is likely to remain above pre-pandemic levels so long as the labor market remains tight.
Economic Bulletin , Issue March 1st, 2023 , Pages 4

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