Over the last several weeks, we’ve seen what Michael Mackenzie in the FT called a renewal of the market’s tortured dance with the Fed. The basic story seems to be that the Fed “moved policy to the sidelines” at its March meeting, causing market participants to discount any risk of a near-term rate increase. The […]
Author: Jon Faust
Beyond the dots
Since the last FOMC meeting, we have again heard cries of lost Fed credibility and of general confusion. In contrast, my colleagues and I at the CFE have been arguing for many months now that we would likely see what has in fact transpired. In our view, the Fed’s actions, including those at the March […]
Still Crazy After All These Years
For the past several years, the Congressional Budget Office has been offering frightening forecasts about government debt growing out of control unless strong action is taken. While these forecasts have played a prominent role in policy debates, the CFE’s Jonathan Wright and Bob Barbera have for several years been arguing that those forecasts are, well, […]
Lunch and Tea with the Forecasters Club of NY
If you had your TV set tuned to CNBC… August 21, 2001, two commentators were watching Alan Greenspan get out of a car and head to his office. They discussed the color of his tie (maroon) and the brand of shoes he appeared to be wearing (Rockports).’ Danny Hakim, New York Times[1] Yesterday, I had […]
The Pause that Refreshes
How will the Fed respond to the recent drops in the stock market? We might get a hint from the Fed’s conduct after last August’s turbulence, which now looks like a dress rehearsal for the current problems. In that event, the Fed chose to forgo the widely-signaled liftoff in September, but then implemented liftoff amid […]
Liftoff? And then…
Early December finds us asking the traditional question on the eve of the holidays: What will the Fed give us for interest rates next year? Holidays past might provide some guidance. The Fed’s policy projections going into the December FOMC last year showed a year-end 2015 median federal funds rate of about 1.5 percent, with […]
Unconventional Lessons for Unwinding Unconventional Policy, I: The Volcker Disinflation
The Fed is (data dependently) on the cusp of attempting to engineer something unprecedented—a relatively benign liftoff of short-term interest rates after an extended period with those rates near their lower bound. Many analysts have been carefully analyzing past tightening episodes hoping to understand the likely Fed behavior, and I am regularly asked what I […]
Dots …
Just before the release of the FOMC’s Survey of Economic Projections (SEP) in December, I posted a piece saying that the dots would reveal nothing and arguing that, by design, the dot plot is not likely to help us understand policy. My main critique is that the dots convey the range of opinions, but shed […]
Of dots and (considerable) periods
In a recent post, I argued that the Bernanke and Yellen Fed’s have been striving for a ‘no tea leaves’ approach to policy communications. An astute JHU student responded, ‘How about those dots?’ Good students can be annoying that way. There is a sound reason for publishing the dot plot, but we should not expect […]
What do markets expect the Fed to do?
Matt Raskin, along with several co-authors (Richard Crump, Emanuel Moench, William O’Boyle, Carlo Rosa, and Lisa Stowe), has published a series on measuring policy interest rate expectations on the NY Fed’s Liberty Street Economic Blog. These blog posts provide an excellent discussion of how to interpret market and survey-based indicators of interest rate expectations. For […]
Hawks, Doves, and Tea Leaves
In its most recent policy statement, the FOMC removed the phrase, “there remains significant underutilization of labor resources” and substituted that the “underutilization of labor resources is gradually diminishing.” Fed watchers have pronounced this hawkish. I have a different reading, resting on my perception of two recent changes I perceive in Fed communications. Having been […]
Nice weather we're having? Seasons and jobs
When macroeconomic data such as today’s employment report are released, we often focus on seasonally adjusted numbers. Seasonally adjusted employment numbers smooth through changes in employment that are judged to be part of some annual cycle such as the jump in retail employment every year as the Christmas buying season ramps up. Of course, there […]