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130 posts on "Monetary Policy"

January 09, 2018

Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization



LSE_Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization

In the wake of the global financial crisis, the Federal Reserve dramatically increased the size of its balance sheet—from about $900 billion at the end of 2007 to about $4.5 trillion today. At its September 2017 meeting, the Federal Open Market Committee (FOMC) announced that—effective October 2017—it would initiate the balance sheet normalization program described in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans.

Continue reading "Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization" »

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

November 30, 2017

How Much Is Priced In? Market Expectations for FOMC Rate Hikes from Different Angles



LSE_2017_ Market Expectations for FOMC Rate Hikes from Different Angles

It is essential for policymakers and financial market participants to understand market expectations for the path of future policy rates because these expectations can have important implications for financial markets and the broader economy. In this post—which is meant to complement prior Liberty Street Economics posts, including Crump et al. (2014a, 2014b ) and Brodsky et al. (2016a, 2016b)—we offer some insights into estimating and interpreting market expectations for increases in the federal funds target range at upcoming meetings of the Federal Open Market Committee (FOMC).

Continue reading "How Much Is Priced In? Market Expectations for FOMC Rate Hikes from Different Angles" »

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

November 28, 2017

The New York Fed DSGE Model Forecast–November 2017



This post presents our quarterly update of the economic forecast 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 August 2017.

Continue reading "The New York Fed DSGE Model Forecast–November 2017" »

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

November 06, 2017

Mission Almost Impossible: Developing a Simple Measure of Pass-Through Efficiency



LSE_2017_Mission Almost Impossible: Developing a Simple Measure of Pass-Through Efficiency

Short-term credit markets have evolved significantly over the past ten years in response to unprecedentedly high levels of reserve balances, a host of regulatory changes, and the introduction of new monetary policy tools. Have these and other developments affected the way monetary policy shifts “pass through” to money markets and, ultimately, to households and firms? In this post, we discuss a new measure of pass‑through efficiency, proposed by economists Darrell Duffie and Arvind Krishnamurthy at the Federal Reserve’s 2016 Jackson Hole summit.

Continue reading "Mission Almost Impossible: Developing a Simple Measure of Pass-Through Efficiency" »

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

October 12, 2017

Just Released: New York Fed Markets Data Dashboard



LSE_2017_http://libertystreeteconomics.newyorkfed.org/2017/10/just-released-new-york-fed-markets-data-dashboard.html

The Federal Reserve Bank of New York releases data on a number of market operations, reference rates, monetary policy expectations, and Federal Reserve securities portfolio holdings. These data are released at different times, for different types of securities or rates, and for different audiences. In an effort to bring this information together in a single, convenient location, the New York Fed developed the Markets Data Dashboard, which was launched today.

Continue reading "Just Released: New York Fed Markets Data Dashboard" »

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

October 11, 2017

U.S. Monetary Policy as a Changing Driver of Global Liquidity



LSE_2017_U.S. Monetary Policy as a Changing Driver of Global Liquidity

International capital flows channel large volumes of funds across borders to both public and private sector borrowers. As they are critically important for economic growth and financial stability, understanding their main drivers is crucial for both policymakers and researchers. In this post, we explore the evolving impact of changes in U.S. monetary policy on global liquidity.

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

September 27, 2017

Why Pay Interest on Excess Reserve Balances?



LSE_2017_Why Pay Interest on Excess Reserve Balances?

In a previous post, we described some reasons why it is beneficial to pay interest on required reserve balances. Here we turn to arguments in favor of paying interest on excess reserve balances. Former Federal Reserve Chairman Ben Bernanke and former Vice Chairman Donald Kohn recently discussed many potential benefits of paying interest on excess reserve balances and some common misunderstandings, including that paying interest on reserves restricts bank lending and provides a subsidy to banks. In this post, we focus primarily on benefits related to the efficiency of the payment system and the reduction in the need for the provision of credit by the Fed when operating in a framework of abundant reserves.

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

September 25, 2017

Why Pay Interest on Required Reserve Balances?



LSE_2017.09.25_Interest-on-Reserves_GettyImages-824163956_460x288


The Federal Reserve has paid interest on reserves held by banks in their Fed accounts since 2008. Why should it do so? Here, we describe some benefits of paying interest on required reserve balances. Since forcing banks to hold unremunerated reserves would be akin to levying a tax on them, paying interest on these balances is a way to eliminate or greatly reduce that tax and its negative effects.

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Posted by Blog Author at 7:00 AM in Federal Reserve, Monetary Policy | Permalink | Comments (10)

September 08, 2017

The New York Fed DSGE Model Forecast—August 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 May 2017.

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

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

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)
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