The Fed Gooses the Capital Markets
If you were watching capital markets closely yesterday, you saw a phenomenon that has rarely been seen before. I certainly never have. And it was linked to the Federal Reserve’s policy statement, released about 2:15pm Eastern time. This was an extraordinary statement, containing several rarely-seen features. The first one, of course, was the commitment by the Fed to keep policy interest rates at or near | Read More »
What Bernanke Should Say About Unemployment: David Leonhardt Gets It Wrong
Dave Leonhardt has a piece in today’s New York Times (“Holding Bernanke Accountable,” no link due to paywall). I’m sad about this piece because Leonhardt is a very knowledgeable guy whom I always enjoy reading. But I find that he has a tendency to fall back on conventional wisdom. At times I feel that his research is limited to what he reads in his own | Read More »
Interest Rates Are Zero. What Does the Federal Reserve Do Now?
The Federal Reserve’s tool of choice for setting and communicating its broad monetary policy has been the level of the “Fed Funds rate.” You’ve heard many times that the Fed raises or lowers interest rates to cool down or heat up the economy. “Fed funds” is the nickname for the reserve balances that banks are required to hold on account with the Fed itself. Banks | Read More »