By Jon Faust. Kevin Warsh has made no secret of his desire to remain silent about where monetary policy is headed. Indeed, this is the main thing about the day-to-day conduct of policy that he has been transparent about. So those of us interested in the likely course of policy may be left to the...
Bridge the Gaps
The Center for Financial Economics advances knowledge of the economic forces driving the financial system through research and teaching. Our work explores the fundamental economics of our current system and the dynamic tensions that will spur change.
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News & Announcements
Regime Change at the Fed
By Jon Faust On Friday, Kevin Warsh will bring two agendas to the Fed, regime change and lowering interest rates. To be fair, Trump assigned that second one, and unless the outlook changes materially, the FOMC won’t be lowering interest rates any time soon. As I argued in my previous post, Warsh will likely go...
Financial Market Madness, Dickensian Future, Or Through a Glass Darkly?
by Bob Barbera Consider the chart, directly below. It depicts quarterly readings on consumer sentiment and the equity risk premium. In general, the happier are consumers, the smaller the premium investors get for bearing risk. Conversely, when despair is in the air, stocks are cheap, and accordingly, the risk premium is high. Except for the...
Thoughts on the Warsh Confirmation Hearing and Beyond
By Jon Faust With all the news about the Gulf last week you may have missed some remarkable Fed news. Going against Trump’s demand for lower interest rates, Treasury Secretary Bessent said that Fed rate cuts should come eventually but, “if they want to wait for some clarity, I understand that.” Fed Governor Stephen Miran...
Monetary policy: What not to do
By Bob Barbera and Jon Faust Fed Chair William McChesney Martin famously said that the Fed’s job was to remove the punchbowl just when the party was warming up. That always struck us as astute to a point, but following that advice too strictly would surely ruin what might otherwise be some wonderful parties. Of...
The Fed and Trump
By Jon Faust In light of recent events and today’s front pages, I have an update to something I said last April: “Trump seems to want all the significant sources of authority in this world to bend to his whims: courts, elite universities, foreigners—both friend and foe. It strikes me as quite unlikely that the...