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Discussion Paper
Who’s Borrowing and Lending in the Fed Funds Market Today?
The Federal Open Market Committee (FOMC) communicates the stance of monetary policy through a target range for the federal funds rate, which is the rate set in the market for uncollateralized short-term lending and borrowing of central bank reserves in the U.S. Since the global financial crisis, the market for federal funds has changed markedly. In this post, we take a closer look at who is currently trading in the federal funds market, as well as the reasons for their participation.
Newsletter
How Do We Measure Inflation?
One goal of monetary policy is price stability, which requires a measure of prices over time. The gold standard maintained the stability of one price, that of gold. Today, we need to consider a broad array of prices. The Federal Reserve?s policymaking body, the Federal Open Market Committee (FOMC), uses the personal consumption expenditures (PCE) deflator as its index of prices. But what is it, and why does the Fed consider this measure the most suitable?
Journal Article
Have Lags in Monetary Policy Transmission Shortened?
The Federal Open Market Committee’s monetary policy has expanded beyond changing the federal funds rate to include forward guidance and balance sheet policy. Using these tools may shorten lags in monetary policy transmitting to inflation. Using a proxy funds rate that incorporates tightening from these additional policy tools, we find evidence of a shorter lag in policy transmission to inflation since 2009, though with high associated uncertainty.
Speech
Bullard Discusses U.S. Economy and Monetary Policy during UBS Panel
St. Louis Fed President Jim Bullard shared his views on various aspects of the U.S. economy and monetary policy during a panel discussion at the UBS European Conference 2021.Bullard said he thinks that U.S. real GDP growth coming in softer than expected in the third quarter is “a temporary phenomenon,” with growth being pushed out to the fourth quarter and through next year. He expects real GDP growth to be higher than 4% for all of 2022.In discussing the very tight labor market in the U.S., Bullard cited the unemployment-to-vacancies ratio, the unemployment rate and a labor market ...
President Bullard Explains His Recent FOMC Dissent
St. Louis Fed President Jim Bullard discusses why he cast a dissenting vote at the FOMC meeting in March 2022.
Journal Article
Inflation in 1972: A Cautionary Tale
The path of inflation over the past two years looks strikingly similar to the path observed during the 1970s,when the Federal Open Market Committee shifted its focus away from fighting inflation before pricepressures were fully under control. Although policymakers in both the 1970s and today have facedextraordinary challenges, future perceptions of current policy will likely be defined primarily by theoutcome of the Committee’s attempts to curb inflation, rather than the circumstances surrounding it.
FOMC Actions and Recent Movements in Five-Year Inflation Expectations
Though the five-year breakeven inflation rate is still higher than the Fed’s 2% target, recent FOMC actions appear to be moderating inflation expectations.
Discussion Paper
Short-Dated Term Premia and the Level of Inflation
Since the advent of derivatives trading on short-term interest rates in the 1980s, financial commentators have often interpreted market prices as directly reflecting the expected path of future interest rates. However, market prices generally embed risk premia (or “term premia” in reference to measures of risk premia over different horizons) reflecting the compensation required to bear the risk of the asset. When term premia are large in magnitude, derivatives prices may differ substantially from investor expectations of future rates. In this post, we assess whether term premia have ...
A Look at Fed Tightening Episodes since the 1980s: Part I
An inverted Treasury yield curve—an historically accurate predictor of recessions—has followed two-thirds of the Fed’s tightening episodes since the early 1980s.