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42 posts on "Expectations"

August 22, 2016

How Do People Revise Their Inflation Expectations?



LSE_How Do People Revise Their Inflation Expectations?

The New York Fed started releasing results from its Survey of Consumer Expectations (SCE) three years ago, in June 2013. The SCE is a monthly, nationally representative, internet-based survey of a rotating panel of about 1,300 household heads. Its goal, as described in a series of Liberty Street Economics posts, is to collect timely and high-quality information on consumer expectations about a broad range of topics, covering both macroeconomic variables and the households' own situation. In this post, we look at what drives changes in consumer inflation expectations. Do people respond to changes in recent realized inflation, and to expected and realized changes in prices of salient individual commodities—like gasoline? Understanding what drives inflation expectations is important for the conduct of monetary policy, since it improves a central bank’s ability to assess its own credibility and to evaluate the impact of its policy decisions and communication strategy.

Continue reading "How Do People Revise Their Inflation Expectations?" »

Posted by Blog Author at 7:00 AM in Expectations, Household Finance, Inflation | Permalink | Comments (0)

July 18, 2016

Forecasting Interest Rates over the Long Run



LSE_Forecasting Interest Rates over the Long Run

In a previous post, we showed how market rates on U.S. Treasuries violate the expectations hypothesis because of time-varying risk premia. In this post, we provide evidence that term structure models have outperformed direct market-based measures in forecasting interest rates. This suggests that term structure models can play a role in long-run planning for public policy objectives such as assessing the viability of Social Security.

Continue reading "Forecasting Interest Rates over the Long Run" »

June 02, 2016

Just Released: 2016 SCE Housing Survey Shows Modest Decline in Home Price Expectations



LSE_2016 SCE Housing Survey Shows Modest Decline in Home Price Expectations

The Federal Reserve Bank of New York’s 2016 SCE Housing Survey indicates that home price growth expectations have declined somewhat relative to last year, but the majority of households still view housing as a good financial investment. Mortgage rate expectations have also declined since last year’s survey, and renters now perceive that it has become somewhat less difficult to get a mortgage if they wanted to buy a home.

Continue reading "Just Released: 2016 SCE Housing Survey Shows Modest Decline in Home Price Expectations" »

Posted by Blog Author at 11:00 AM in Expectations, Housing | Permalink | Comments (0)

May 23, 2016

The FRBNY DSGE Model Forecast—May 2016



The May 2016 forecast of the Federal Reserve Bank of New York’s (FRBNY) dynamic stochastic general equilibrium (DSGE) model remains broadly in line with those of our two previous semiannual reports (see our May 2015 and December 2015 posts). In the past year, the headwinds that contributed to slower growth in the aftermath of the financial crisis finally began to abate. However, the widening of credit spreads associated with swings in financial markets in the second half of 2015 and the first few months of this year have had a negative impact on economic activity. Despite this setback, the model expects a rebound in growth in the second half of the year, so that the medium-term forecast remains, as in the December post, one of steady, gradual economic expansion. The model also continues to predict gradual progress in the inflation rate toward the Federal Open Market Committee’s (FOMC) long-run target of 2 percent.

Continue reading "The FRBNY DSGE Model Forecast—May 2016" »

April 08, 2016

Reconciling Survey- and Market-Based Expectations for the Policy Rate



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 have to be altered to match the market-implied path of the federal funds rate. We interpret any discrepancy between the original and tilted distributions as arising from either risk premia or dispersion in beliefs.

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Posted by Blog Author at 7:00 AM in Expectations, Fed Funds, Financial Markets, Monetary Policy | Permalink | Comments (0)

February 25, 2016

Just Released: Five New Data Series on Consumer Expectations



LSE_2016_JR_consumer-expectation_klaaw_460_art

Today, the New York Fed is introducing a number of new data series and interactive charts reporting findings from its Survey of Consumer Expectations (SCE). Since January 2014, we have been reporting findings from this monthly survey on U.S. households’ views on inflation, commodity prices, the labor market and household finances. In addition to interactive charts showing national trends (going back to June 2013), as well as trends by demographic groups (age, income, education, numeracy and geography), we also make the underlying micro data (with a nine-month lag) available for download for research purposes.

Continue reading "Just Released: Five New Data Series on Consumer Expectations " »

Posted by Blog Author at 7:00 AM in Expectations, Household Finance, Inflation, Unemployment | Permalink | Comments (0)

January 05, 2016

Who is Driving the Recent Decline in Consumer Inflation Expectations?



Correction: In the right panel of the chart, “Mean Probability of Deflation in the SCE,” we have corrected the labels for the group earning less than $75k, which were initially transposed. We regret the error.

LSE_2015_decline-in-inflation-expectations_armantier_460_art

The expectations of U.S. consumers about inflation have declined to record lows over the past several months. That is the finding of two leading surveys, the Federal Reserve Bank of New York’s Survey of Consumer Expectations (SCE) and the University of Michigan’s Survey of Consumers (SoC). In this post, we examine whether this decline is broad-based or whether it is driven by specific demographic groups.

Continue reading "Who is Driving the Recent Decline in Consumer Inflation Expectations?" »

Posted by Blog Author at 7:00 AM in Expectations, Household Finance, Inflation, Macroecon | Permalink | Comments (0)

December 07, 2015

Dealer Positioning and Expected Returns



LSE_2015_dealer-positioning_adrian_460_art

Securities broker-dealers (dealers) trade securities on behalf of their customers and themselves. Recently, analysts have pointed to the decline in U.S. dealers’ corporate bond inventories as evidence that dealers’ market making capacity is impaired. However, historically such inventories also reflect dealers’ risk management and proprietary trading activities. In this post, we take a long-term perspective on the evolution of dealers’ inventories of corporate bonds, Treasuries, and other debt securities and relate those inventories to expected returns in fixed-income markets in an effort to better understand the drivers of dealer positioning.


Continue reading "Dealer Positioning and Expected Returns" »

September 23, 2015

How Much Do Inflation Expectations Matter for Inflation Dynamics?



Inflation dynamics are often described by some form of the Phillips curve. Named after A. W. Phillips, the British economist whose study of U.K. wage and unemployment data laid the groundwork, the Phillips curve denotes an inverse relationship between inflation and some measure of economic slack. A much-discussed issue in the literature is how forward-looking this relationship is. In this post, we address this question using a flexible version of the New Keynesian Phillips curve (NKPC) to illustrate the key role that expectations play in inflation dynamics.

Continue reading "How Much Do Inflation Expectations Matter for Inflation Dynamics?" »

July 13, 2015

The Survey of Consumer Expectations Turns Two!



Survey of Consumer Expectations

The Federal Reserve Bank of New York’s Survey of Consumer Expectations (SCE) turned two years old in June. In this post, we review some of the key findings from the first two years of the survey’s history, highlighting the most noteworthy trends revealed in the data.

Continue reading "The Survey of Consumer Expectations Turns Two!" »

Posted by Blog Author at 11:00 AM in Expectations, Household Finance, Inflation, Labor Economics, Wages | Permalink | Comments (0)
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