monetary-policy

Photo of Kevin Warsh from bloomberg.com via the Wall Street Journal It was a foregone conclusion that at its meeting that ended today, the Federal Open Market Committee (FOMC) would leave unchanged its target range for the federal funds rate at 3.50 percent to 3.75 percent. There was great interest, however, about whether at his … Continue reading "FOMC Holds Target Rate Constant as Warsh Promise…

The Federal Reserve (Fed) implements monetary policy in a regime of ample reserves , where short-term interest rates are controlled mainly through the setting of administered rates, and active management of the reserve supply is not required. In yesterday’s post , we proposed a methodology to evaluate the ampleness of reserves in real time based on the slope of the reserve demand curve—the elasti…

As shown in a past Liberty Street Economics post , in the United States, the yields of money market fund (MMF) shares respond to changes in monetary policy rates much more than the rates of bank deposits; in other words, the MMF beta is much higher than the deposit beta. Consistent with this, the size of the U.S. MMF industry fluctuates over the interest rate cycle, expanding during times of mone…

How can we gauge the tightness of monetary policy? The SF Fed’s new monthly Proxy Funds Rate page focuses on financial market indicators to measure monetary policy tightness beyond what the federal funds rate level can show.

In July 2021, the Federal Open Market Committee announced a new tool for monetary policy implementation: a domestic standing repurchase agreement facility. In the last post of this series, we explain what this new tool is and how it will support the effective implementation of monetary policy in the floor system through which the Fed implements policy.

In response to the 2007-2009 financial crisis, in December 2008, the Federal Open Market Committee effectively cut its target for the federal funds to zero where it remained during the first six years of the recovery. In December 2015, Fed Chair Janet Yellen and the FOMC began the process of normalizing monetary policy by raising … Continue reading "Is the Natural Rate of Unemployment the Best Gu…

Since 2008, the Federal Reserve has dramatically increased the supply of bank reserves, effectively adopting a floor system for monetary policy implementation. Since then, the behavior of short-term money market rates has been at times puzzling. In particular, short-term rates have been surprisingly firm in recent months, despite the large increase in reserves by the Fed as a part of its response…

In December 2015, the Federal Reserve tightened monetary policy for the first time in almost ten years and, over the following three years, it raised interest rates eight more times, increasing the target range for the federal funds rate from 0-25 basis points (bps) to 225-250 bps. To what extent are changes in the fed funds rate transmitted to cash investors, and are there differences in the pas…

In a previous post, we compared the Federal Reserve’s discount window with the standing lending facilities (SLFs) at the Bank of England (BoE), the European Central Bank (ECB), and the Bank of Japan (BoJ). We showed that the Fed’s discount window was less integrated with monetary policy than the SLFs of the other central banks. In this post, we observe that the counterparty and collateral policie…

Columbia University’s School of International and Public Affairs and the New York Fed co-sponsored a recent workshop to discuss important issues related to monetary policy implementation. The May 4 event, held at Columbia, supports the extended effort that the Federal Reserve has undertaken to evaluate potential long-run monetary policy implementation frameworks, which was announced at a Federal …

What types of counterparties can borrow from or lend to a central bank, and what kind of collateral must they possess in order to receive a loan? These are two key aspects of a central bank’s monetary policy implementation framework. Since at least the nineteenth century, it has been understood that an important role of central banks is to lend to solvent but illiquid institutions, particularly …

Emily Eisner, Antoine Martin, and Ylva Søvik In the minutes of the July 2015 Federal Open Market Committee (FOMC) meeting, the chair indicated that Federal Reserve staff would undertake an extended effort to evaluate potential long-run monetary policy implementation frameworks. But what is a central bank’s monetary policy implementation framework? In a series of four […]

Liberty Street Economics posts from New York Fed economists can serve as teaching tools for new monetary policy and lending tools that are "not found in any textbook."

Research economists discuss their process for providing advice on monetary policy to the New York Fed president ahead of FOMC meetings.

Market expectations of the path of future policy rates can have important implications for financial markets and the economy.

In the fall of 2008, the Fed added new policy tools to its portfolio of techniques for implementing monetary policy.