Searching For Banking Regulation’s Godiva

The Federal Reserve is mulling a new set of tougher banking rules to boost the odds that the financial system will remain sufficiently liquid when the next crisis strikes. It’s a worthy goal, if only because one day another event will surely arrive. But all the usual caveats apply when it comes to engineering outcomes in economics, starting with […]

Fed Watch: Williams Acknowledges Forecast Change

Earlier today I said: Fourth, the dots undeniably moved forward and steeper, which means individual outlooks on the definitions of “considerable period” or “accommodative” did in fact change in meaningful ways.  I am surprised, however, that this was not anticipated by market participants given the rapid decline in the unemployment rate.  Along any given Fed objective function, […]

Great Graphic: The Yellen Effect

This Great Graphic was generated on Bloomberg.  It shows the price of two financial instruments.  The yellow line is the price of the December 2015 Fed funds futures.  The white line is the price of the December 2015 Eurodollar futures contract. Both contracts sold off hard yesterday and are lower today.  From yesterday’s high to today’s low, both […]

Fed Watch: Unintentionally Hawkish

The outcome of the FOMC meeting was pretty much as I anticipated.  Asset purchases were cut by $10 billion.  The Evans rule was dumped.  And forward guidance was enhanced to emphasize that rates would be low for a long, long time.  All seems pretty much in-line with the general consensus. Yet financial market participants took […]

What is the Fed’s Real Inflation Target?

In my last post I showed a figure that suggested the Fed has effectively been targeting a 1-2% core PCE inflation range target. If so, it would be consistent with the observations made by Ryan Avent and Matthew Yglesias that the Fed is using 2% as an upper bound on inflation. Here is Ryan Avent back in April, 2012: The Fed’s second failure is […]

What Is the Outlook for U.S. Monetary Policy?

Will the Federal Open Market Committee’s (FOMC) current large-scale asset purchase program, so-called QE3, continue to melt away as spring arrives? The release of theminutes from the January meeting of the FOMC, along with commentary from various participants in that meeting (noted in rapid succession here, here, and here, for example) have left the distinct impression that the […]

Markets Tumble; How Will the Fed React?

The financial markets are not being kind to freshly minted Federal Reserve Chair Janet Yellen.  The level of scrutiny she will face when she makes what is likely to be her first public appearance as Chair next week was already high, and is rising by the minute.  Global markets are faltering, and US equity markets […]

Fed Watch: And the Taper Continues

The FOMC meeting came and went with the expected result – the tapering process continued on schedule, undeterred by the current emerging market turmoil.  Of course, the Fed doesn’t want to be seen as reacting to every gyration financial markets.  But even more importantly, the Fed wants out of the asset purchase business on the […]

1 2 3 6