143 posts on "Inflation"
October 5, 2016
Why Did the Recent Oil Price Declines Affect Bond Prices of Non‑Energy Companies?
Oil prices plunged 65 percent between July 2014 and December of the following year. During this period, the yield spread—the yield of a corporate bond minus the yield of a Treasury bond of the same maturity—of energy companies shot up, indicating increased credit risk. Surprisingly, the yield spread of non‑energy firms also rose even though many non‑energy firms might be expected to benefit from lower energy‑related costs. In this blog post, we examine this counterintuitive result. We find evidence of a liquidity spillover, whereby the bonds of more liquid non‑energy firms had to be sold to satisfy investors who withdrew from bond funds in response to falling energy prices.
Posted at 7:00 am in Corporate Finance, Credit, Financial Markets, Inflation, Liquidity, Treasury, Unemployment | Permalink
August 22, 2016
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 household’s 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.
August 15, 2016
What Drives Forecaster Disagreement about Monetary Policy?
What can disagreement teach us about how private forecasters perceive the conduct of monetary policy? In a previous post, we showed that private forecasters disagree about both the short-term and the long-term evolution of key macroeconomic variables but that the shape of this disagreement differs across time. In contrast to their views on other macroeconomic variables, private forecasters disagree substantially about the level of the federal funds rate that will prevail in the medium to long term but very little on the rate at shorter horizons. In this post, we explore the possible explanations for what drives forecasts of the federal funds rate, especially in the longer run.
Posted at 7:00 am in Forecasting, Inflation, Macroeconomics, Monetary Policy | Permalink | Comments (1)
August 9, 2016
Just Released: Recent Developments in Consumer Credit Card Borrowing
The Federal Reserve Bank of New York’s Center for Microeconomic Data today released its Quarterly Report on Household Debt and Credit for the second quarter of 2016.
Posted at 11:05 am in Credit, Household Finance, Inflation, Puerto Rico, Regional Analysis | Permalink
August 8, 2016
Restoring Economic Growth in Puerto Rico: Introduction to the Series
The difficult economic and financial issues facing the Commonwealth of Puerto Rico have remained very much in the news since our post on options for addressing its fiscal problems appeared last fall. That post was itself a follow-up on a series of analyses, starting with a 2012 report that detailed the economic challenges facing the Commonwealth. In 2014, we extended that analysis with an update where we focused more closely on the fiscal challenges facing the Island. As the problems deepened, we have continued to examine important related subjects ranging from positive revisions in employment data, to the understanding emigration, and to considering how the Commonwealth’s public debts stack up. In most of this work, we have focused on how policymakers could help to address the immediate issues facing the Island and its people. The U.S. Congress and the Obama Administration took action in June to provide a framework to help address Puerto Rico’s fiscal crisis. But much remains to be done to address these ongoing problems, which represent a significant impediment to economic growth in the short run. It also seems important to revisit the question of the prospects for reviving longer-run growth in the Commonwealth. These concerns were underscored by projections published by the International Monetary Fund (IMF) in the April edition of the World Economic Outlook that forecast Puerto Rico’s real GDP and population to decline through 2021.
Posted at 7:00 am in Credit, Employment, Fed Funds, Fiscal Policy, Forecasting, Inflation, International Economics, Puerto Rico, Regional Analysis | Permalink | Comments (1)
July 18, 2016
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.
Posted at 7:00 am in Expectations, Financial Markets, Fiscal Policy, Forecasting, Household Finance, Inflation, Treasury | Permalink | Comments (1)
June 6, 2016
Is Health Insurance Good for Your Financial Health?
What is the purpose of health care? What is the purpose of health insurance? When people fall ill, they seek health care in order to get better. But insurance has a slightly different function: Its main role is not to protect our health per se, but to protect our finances. For most people, lifetime health expenditures are quite low. However, some people have enormous health costs owing to major illnesses or health conditions. And this is where health insurance comes in—its goal (like that of any other form of insurance) is to protect these individuals against large, and sometimes ruinous, health expenditures. Has the recent health reform served this purpose?
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.
May 18, 2016
International Evidence on the Use and Effectiveness of Macroprudential Policies
Ozge Akinci In recent years, policymakers in advanced and emerging economies have employed a variety of macroprudential policy tools—targeted rules or requirements that enhance the stability of the financial system as a whole by addressing the interconnectedness of individual financial institutions and their common exposure to economic risk factors. To examine the foreign experience with […]
February 25, 2016
Just Released: Five New Data Series on Consumer Expectations
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).
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