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4 posts on "tightening cycle"
May 11, 2023

Bank Funding during the Current Monetary Policy Tightening Cycle

Stephan Luck, Matthew Plosser, and Josh Younger

decorative photo: image of the outside of a silicon valley bank building.

Recent events have highlighted the importance of understanding the distribution and composition of funding across banks. Market participants have been paying particular attention to the overall decline of deposit funding in the U.S. banking system as well as the reallocation of deposits within the banking sector. In this post, we describe changes in bank funding structure since the onset of monetary policy tightening, with a particular focus on developments through March 2023.

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Posted at 7:00 am in Bank Capital, Banks, Federal Reserve, Financial Institutions | Permalink | Comments (1)
April 7, 2023

What’s New with Corporate Leverage?

Nina Boyarchenko and Or Shachar

Decorative: corporate buildings with bond market yields superimposed.

The Federal Open Market Committee (FOMC) started increasing rates on March 16, 2022, and after the January 31–February 1, 2023, FOMC meeting, the lower bound of the target range of the federal funds rate had reached 4.50 percent, a level last registered in November 2007. Such a rapid rates increase could pass through to higher funding costs for U.S. corporations. In this post, we examine how corporate leverage and bond market debt have evolved over the course of the current tightening cycle and compare the current experience to that during the previous three tightening cycles.

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Posted at 7:00 am in Corporate Finance, Monetary Policy | Permalink
February 13, 2023

How Much Can the Fed’s Tightening Contract Global Economic Activity?

Julian di Giovanni and Neel Lahiri

Decorative: illustration with the world map, infographics and numbers. International finance, trade and economy concept.

What types of foreign firms are most affected when the Federal Reserve raises its policy rate?  Recent empirical research used cross-country firm level data and information on input-output linkages and finds that the impact on sales and investment spending is largest in sectors with exposure to trade in intermediate goods. The research also finds that financial factors drive differences, with U.S. monetary policy spillovers having a much smaller impact on firms that are less financially constrained.

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Posted at 7:00 am in International Economics, Monetary Policy | Permalink
November 20, 2019

Monetary Policy Transmission and the Size of the Money Market Fund Industry

Marco Cipriani, Jeff Gortmaker, and Gabriele La Spada

Assets under management (AUM) of retail money market funds (MMF) have soared during monetary policy tightening episodes, lagging the spread between MMF yields and CD rates.

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Posted at 7:00 am in Federal Reserve, Financial Institutions, Financial Intermediation, Monetary Policy | Permalink | Comments (4)

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