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121 posts on "Monetary Policy"

August 16, 2017

Counterparty and Collateral Policies of Central Bank Lending Facilities



Editor’s note: When this post was first published there was an omission in text; text has been restored. (August 16, 2017, 9:05 a.m.)

LSE_Counterparty and Collateral Policies of Central Bank Lending Facilities

In a previous post, we compared the Federal Reserve’s discount window with the standing lending facilities (SLFs) at the Bank of England (BoE), the European Central Bank (ECB), and the Bank of Japan (BoJ). We showed that the Fed’s discount window was less integrated with monetary policy than the SLFs of the other central banks. In this post, we observe that the counterparty and collateral policies of the Fed’s discount window are similarly less integrated with the practices involved in monetary policy operations, in comparison with the other central banks.

Continue reading "Counterparty and Collateral Policies of Central Bank Lending Facilities" »

Posted by Blog Author at 7:00 AM in Central Bank, Monetary Policy | Permalink | Comments (0)

August 04, 2017

A Closer Look at the Fed’s Balance Sheet Accounting



LSE_2017_A Closer Look at the Fed’s Balance Sheet Accountingt


An earlier post on how the Fed changes the size of its balance sheet prompted several questions from readers about the Federal Reserve’s accounting of asset purchases and the payment of principal by the Treasury on Treasury securities owned by the Fed. In this post, we provide a more detailed explanation of the accounting rules that govern these transactions.

Continue reading "A Closer Look at the Fed’s Balance Sheet Accounting" »

July 11, 2017

How the Fed Changes the Size of Its Balance Sheet: The Case of Mortgage-Backed Securities



LSE_2017_How the Fed Changes the Size of Its Balance Sheet: The Case of Mortgage-Backed Securities

In our previous post, we considered balance sheet mechanics related to the Federal Reserve’s purchase and redemption of Treasury securities. These mechanics are fairly straightforward and help to illustrate the basic relationships among actors in the financial system. Here, we turn to transactions involving agency mortgage-backed securities (MBS), which are somewhat more complicated. We focus particularly on what happens when households pay down their mortgages, either through regular monthly amortizations or a large payment covering some or all of the outstanding balance, as might occur with a refinancing.

Continue reading "How the Fed Changes the Size of Its Balance Sheet: The Case of Mortgage-Backed Securities" »

Posted by Blog Author at 7:00 AM in Central Bank, Federal Reserve, Monetary Policy | Permalink | Comments (1)

July 10, 2017

Just Released: Updated SOMA Portfolio and Income Projections



LSE_2017_Updated SOMA Portfolio and Income Projections

The Federal Reserve Bank of New York’s Markets Group today published a report presenting updated staff projections for the future path of domestic securities held in the System Open Market Account (SOMA) and portfolio-related income. The updated projections incorporate very recent information and are provided as a tool for the public to further understand factors affecting the evolution of the Federal Reserve’s balance sheet.

Continue reading "Just Released: Updated SOMA Portfolio and Income Projections" »

Posted by Blog Author at 10:00 AM in Federal Reserve, Monetary Policy | Permalink | Comments (0)

How the Fed Changes the Size of Its Balance Sheet



LSE_2017_How the Fed Changes the Size of Its Balance Sheet

The size of the Federal Reserve’s balance sheet increased greatly between 2009 and 2014 owing to large-scale asset purchases. The balance sheet has stayed at a high level since then through the ongoing reinvestment of principal repayments on securities that the Fed holds. When the Federal Open Market Committee (FOMC) decides to reduce the size of the Fed’s balance sheet, it is expected to do so by gradually reducing the pace of reinvestments, as outlined in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans. How do asset purchases increase the size of the Fed’s balance sheet? And how would reducing reinvestments reduce the size of the balance sheet? In this post, we answer these questions by describing the mechanics of the Fed’s balance sheet. In our next post, we will describe the balance sheet mechanics with respect to agency mortgage-backed securities (MBS).

Continue reading "How the Fed Changes the Size of Its Balance Sheet" »

Posted by Blog Author at 7:00 AM in Central Bank, Federal Reserve, Monetary Policy | Permalink | Comments (8)

June 30, 2017

The Role of Central Bank Lending Facilities in Monetary Policy



Editor’s note: This post was originally published on June 30, 2017. We are running it again today, August 14, in conjunction with a companion piece scheduled for August 16. An error in the table was corrected on July 3.

LSE_The Role of Central Bank Lending Facilities in Monetary Policy

Central bank lending facilities were vital during the financial crisis of 2007-08 when many banks and nonbank financial institutions turned to them to meet funding needs as private funding dried up. Since then, there has been renewed interest in the design of central bank lending facilities in the post-crisis period. In this post, we compare the Federal Reserve’s discount window with the lending facilities at three other major central banks: the Bank of England (BoE), the European Central Bank (ECB), and the Bank of Japan (BoJ). We observe that, relative to the other central banks, the Fed’s discount window is less integrated into the monetary policy framework. In a follow-up post, we will discuss differences in the central banks’ counterparty and collateral policies.

Continue reading "The Role of Central Bank Lending Facilities in Monetary Policy" »

Posted by Blog Author at 9:29 AM in Central Bank, Monetary Policy | Permalink | Comments (0)

May 31, 2017

The New York Fed DSGE Model Forecast—May 2017



This post presents our quarterly update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since February 2017. As usual, we wish to remind our readers that the DSGE model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process. For more information about the model and variables discussed here, see our DSGE Model Q & A.

Continue reading "The New York Fed DSGE Model Forecast—May 2017 " »

Posted by Blog Author at 7:00 AM in Macroecon, Monetary Policy | Permalink | Comments (0)

March 29, 2017

QE Frictions: Could Banks Have Favored Refinancing over New Purchase Borrowing?



LSE_QE Frictions: Could Banks Have Favored Refinancing over New Purchase Borrowing?

Quantitative easing (QE)—the Federal Reserve’s effort to provide policy accommodation lowering long-term interest rates at a time when the federal funds rate was near its lower bound—has generated a great deal of research, both about its impact and about the frictions that might limit that impact. For example, this recent study finds that weak competition in local mortgage markets limited the pass-through from QE to mortgage rates for borrowers, and another study suggests that QE expanded banks’ mortgage lending while crowding out their commercial lending. In this post, we look into a different friction—whether banks’ limited risk-taking capacity after the crisis led them to favor refinance mortgages over new mortgage originations.

Continue reading "QE Frictions: Could Banks Have Favored Refinancing over New Purchase Borrowing?" »

Posted by Blog Author at 7:00 AM in Financial Institutions, Housing, Monetary Policy | Permalink | Comments (2)

February 17, 2017

The FRBNY DSGE Model Forecast—February 2017



This post presents the latest update of the economic forecasts generated by the Federal Reserve Bank of New York’s (FRBNY) dynamic stochastic general equilibrium (DSGE) model. We introduced this model in a series of blog posts in September 2014 and published forecasts twice a year thereafter. With this post, we move to a quarterly release schedule, and highlight how our forecasts have changed since November 2016.

Continue reading "The FRBNY DSGE Model Forecast—February 2017" »

Posted by Blog Author at 7:00 AM in Forecasting, Macroecon, Monetary Policy | Permalink | Comments (0)

December 21, 2016

Hey, Economist! Tobias Adrian Reflects on His Work at the N.Y. Fed before Heading to the IMF

LSE_Hey, Economist! Tobias Adrian Reflects on His Work at the N.Y. Fed before Heading to the IMF

Tobias Adrian is leaving the New York Fed to become the Financial Counselor and Director of the Monetary and Capital Markets Department at the International Monetary Fund (IMF). In announcing Adrian’s appointment, Christine Lagarde, managing director of the IMF, described Tobias as “internationally highly regarded for his insightful analytical work.” Until he starts his new position at the beginning of 2017, Adrian will be winding down his service as Senior Vice President of the New York Fed and Associate Director of the Bank’s Research and Statistics Group. Before he moves on to the IMF, Adrian shared some insight on his time at the Bank.

Continue reading "Hey, Economist! Tobias Adrian Reflects on His Work at the N.Y. Fed before Heading to the IMF" »

Posted by Blog Author at 7:00 AM in Hey, Economist!, Monetary Policy | Permalink | Comments (2)
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