As happens eight times a year, next week financial markets will again turn their attention to what, if any, change the Federal Reserve will make to its policy rate. This column discusses research on the anticipation of such decisions via the Fed funds futures markets, which indicates that markets ‘set up’ much farther in advance than has been previously documented. This finding emphasises the importance of clarity in central bank communications.
Robin Lumsdaine, 11 June 2016
Eric Swanson, 08 November 2014
In December 2008, the Fed lowered the federal funds rate to essentially zero and has kept it there since then. This column argues that, contrary to traditional macroeconomic thinking, monetary policy has not been severely constrained by the zero bound until mid-2011. The results imply that the Fed could have done more to ease monetary policy between 2009 and 2011. These findings could also help explain why the fiscal stimulus package adopted in 2009 did not bring the expected success.
Peter Tillmann, 23 February 2012
As the US Federal Reserve starts to increase the transparency of its decision-making process, including the release of economic forecasts and interest-rate projections, this column asks whether these projections reflect strategic motives that might make them less accurate and less useful to those wanting to predict monetary policy.