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Liberty Street Economics
10 posts on "FOMC"April 15, 2020
The COVID-19 Pandemic and the Fed’s Response
The Federal Reserve has taken unprecedented actions to mitigate the effects of the COVID-19 pandemic on U.S. households and businesses. These measures include cutting the Fed’s policy rate to the zero lower bound, purchasing Treasury and mortgage-backed securities (MBS) to promote market functioning, and establishing several liquidity and credit facilities. In this post, we briefly review the developments motivating these actions, summarize what the Fed has done and why, and compare the Fed’s response with its response to the 2007-09 financial crisis.
Continue reading "The COVID-19 Pandemic and the Fed’s Response" »
Posted by Blog Author at 4:11 PM in Crisis, Federal Reserve, FOMC, Great Recession, Monetary Policy, Pandemic | Permalink | Comments (0)April 06, 2020
How the Fed Managed the Treasury Yield Curve in the 1940s
The coronavirus pandemic has prompted the Federal Reserve to pledge to purchase Treasury securities and agency mortgage-backed securities in the amount needed to support the smooth market functioning and effective transmission of monetary policy to the economy. But some market participants have questioned whether something more might not be required, including possibly some form of direct yield curve control. In the first half of the 1940s the Federal Open Market Committee (FOMC) sought to manage the level and shape of the Treasury yield curve. In this post, we examine what can be learned from the FOMC’s efforts of seventy-five years ago.
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Posted by Blog Author at 7:00 AM in Economic History, Fed Funds, Federal Reserve, Financial Markets, Fiscal Policy, FOMC, Pandemic, Treasury | Permalink | Comments (0)May 08, 2019
Ten Years Later—Did QE Work?
By November 2008, the Global Financial Crisis, which originated in the residential housing market and the shadow banking system, had begun to turn into a major recession, spurring the Federal Open Market Committee (FOMC) to initiate what we now refer to as quantitative easing (QE). In this blog post, we draw upon the empirical findings of post-crisis academic research–including our own work–to shed light on the question: Did QE work?
Posted by Blog Author at 7:00 AM in Banks, Central Bank, Employment, Financial Markets, FOMC, Monetary Policy | Permalink | Comments (7)November 26, 2018
The Pre-FOMC Announcement Drift: More Recent Evidence
Editor’s note: When this post was first published, the placement of the shaded confidence intervals in the charts was incorrect; the charts have been corrected. (December 3, 2018, 3:20 p.m.)
We had previously documented large excess returns on equities ahead of scheduled announcements of the Federal Open Market Committee (FOMC)—the Federal Reserve’s monetary policy-making body—between 1994 and 2011. This post updates our original analysis with more recent data. We find evidence of continued large excess returns during FOMC meetings, but only for those featuring a press conference by the Chair of the FOMC.
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September 22, 2017
Just Released: A Monthly Underlying Inflation Gauge
Today marks the launch of the monthly publication of the Underlying Inflation Gauge (UIG). We are reporting two UIG measures, described recently on Liberty Street Economics, that are constructed to provide an estimate of the trend, or persistent, component of inflation. One measure is derived using a large number of disaggregated price series in the consumer price index (CPI), while the second measure incorporates additional information from macroeconomic and financial variables.
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Posted by Blog Author at 7:00 AM in Fiscal Policy, FOMC, Forecasting, Inflation | Permalink | Comments (2)September 09, 2013
Preparing for Takeoff? Professional Forecasters and the June 2013 FOMC Meeting
Richard K. Crump, Stefano Eusepi, and Emanuel Moench
Following the June 18-19 Federal Open Market Committee (FOMC) meeting different measures of short-term interest rates increased notably. In the chart below, we plot two such measures: the two-year Treasury yield and the one-year overnight indexed swap (OIS) forward rate, one year in the future. The vertical line indicates the final day of the June FOMC meeting. To what extent did this rise in rates following the June FOMC meeting reflect a shift in the expected future path of the federal funds rate (FFR)? Market participants and policy makers often directly read the expected path from financial market data such as the OIS contracts. In this post, we take an alternative approach by looking at surveys of professional forecasters to assess how expectations changed.
Continue reading "Preparing for Takeoff? Professional Forecasters and the June 2013 FOMC Meeting" »
Posted by Blog Author at 7:00 AM in FOMC, Forecasting, Macroecon, Monetary Policy | Permalink | Comments (0)January 07, 2013
Making a Statement: How Did Professional Forecasters React to the August 2011 FOMC Statement?
Richard K. Crump, Stefano Eusepi, and Emanuel Moench
The Federal Open Market Committee (FOMC) statement released on August 9, 2011, was the first to incorporate language on “forward guidance” with an explicit date tied to the Committee’s expected path of monetary policy. In this post, we exploit the timing of surveys taken before and after this statement’s release to investigate how professional forecasters changed their expectations of growth, inflation, and monetary policy. We find that the average forecast of the federal funds rate shifts considerably and closely aligns with the new language in the statement, while the average forecasts for growth and inflation change less. While there’s near unanimity among forecasters about the future path of the federal funds rate after the August 2011 FOMC statement, forecasters maintained differing views on the growth and inflation outlooks.
Posted by Blog Author at 7:00 AM in Expectations, FOMC, Macroecon, Monetary Policy | Permalink | Comments (0)November 02, 2012
Historical Echoes: FOMC … “Minutes” by Minutes
Kathleen McKiernan
Although the Federal Reserve was founded in 1913, the Federal Open Market Committee, or FOMC, wasn’t created until passage of the Banking Act of 1933. Congress established the name and legal structure of the FOMC as a formal committee of the twelve Reserve Banks. In 1935, a System reorganization added the seven-member Board of Governors to the twelve Reserve Bank presidents—uniting the centralized and decentralized components of the Fed. In the Banking Act of 1935, Congress mandated that only five of the twelve Reserve Bank presidents would vote at any one time, along with the seven governors. The first FOMC meeting convened a year later, in March 1936.
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October 01, 2012
Is U.S. Monetary Policy Seasonal?
Richard K. Crump and David O. Lucca
Many economic time series display periodic and predictable patterns within each calendar year, generally referred to as seasonal effects. For example, retail sales tend to be higher in December than in other months. These patterns are well-known to economists, who apply statistical filters to remove seasonal effects so that the resulting series are more easily comparable across months. Because policy decisions are based on seasonally adjusted series, we wouldn’t expect the decisions to exhibit any seasonal behavior. Yet, in this post we find that the Federal Reserve has been much more likely to lower interest rates in the first month of each quarter over the past twenty-five years. While some of this seasonality is a result of meeting scheduling, a large seasonal component remains unexplained.
Posted by Blog Author at 7:00 AM in Fed Funds, FOMC, Macroecon, Monetary Policy | Permalink | Comments (0)July 11, 2012
The Puzzling Pre-FOMC Announcement “Drift”
David O. Lucca and Emanuel Moench
For many years, economists have struggled to explain the “equity premium puzzle”—the fact that the average return on stocks is larger than what would be expected to compensate for their riskiness. In this post, which draws on our recent New York Fed staff report, we deepen the puzzle further. We show that since 1994, more than 80 percent of the equity premium on U.S. stocks has been earned over the twenty-four hours preceding scheduled Federal Open Market Committee (FOMC) announcements (which occur only eight times a year)—a phenomenon we call the pre-FOMC announcement “drift.”
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Posted by Blog Author at 7:00 AM in Exchange Rates, Expectations, Financial Markets, FOMC, Monetary Policy, Stocks | Permalink | Comments (9)About the BlogLiberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.
Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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