The Federal Reserve on Wednesday extended its $120 billion monthly asset purchases through September 2021 to provide sustained accommodation to the economy as it recovers from a deep pandemic-induced recession. In addition, as the global economy absorbs the latest series of public health shocks, the U.S. central bank extended its temporary dollar swap ... READ MORE >
Federal Reserve
FOMC preview: Extending guidance as second wave of pandemic peaks
The Federal Open Market Committee this week will almost certainly provide insight into its monetary policy path by extending the weighted average maturity of its Treasury purchases while simultaneously keeping the policy rate effectively at zero. The Federal Reserve’s Summary of Economic Projections will certainly include an improved growth and ... READ MORE >
Comment: Treasury Department moves to end select pandemic-era lending programs
Risks to the economic outlook have been rising recently because an array of benefits meant to blunt the economic downturn are scheduled to expire on Dec. 31. Those risks increased on Thursday when the Treasury Department told the Federal Reserve that it would not extend nine of the 13 liquidity and lending programs aimed at easing the effects of the ... READ MORE >
Election economics: Biden victory projected as Senate hangs in the balance
Joe Biden’s projected victory implies a possible era of significant changes to address the pandemic, expand domestic health care, modernize the nation’s infrastructure and adopt expansionary fiscal policy—all of which will define the economic policy landscape over the next two years. However, the party that controls the Senate will determine the scope of ... READ MORE >
FOMC: Fed policy to remain steady amid economic uncertainty
The Federal Open Market Committee on Thursday kept its policy rate steady at a range between zero and 25 basis points and made little meaningful change to its policy statement. The Fed continued its asset purchase program at $120 billion per month and held the interest it pays on reserves at 0.1% and discount rate at 0.25%. There were no ... READ MORE >
FOMC preview: All is quiet
Thursday's meeting of the Federal Open Market Committee will almost surely signal that all is quiet on the monetary front given the major changes by the central bank this year. We expect no change in the policy rate, forward guidance or the pace of asset purchases. Since the introduction of the outcome-based guidance – an inflation average of 2% over ... READ MORE >
Federal Reserve eases Main Street Lending Program terms to encourage participation
The Federal Reserve on Friday announced changes to the Main Street Lending Program intended to make financing more readily available to small and medium-size businesses struggling amid a resurgence of coronavirus cases. The changes come as negotiations over another round of fiscal aid drag on in Congress and as businesses face the prospect of ... READ MORE >
Monetary policy and inflation in the modern era
The Fed is embarking on a new era in monetary policy, switching from its point target of 2% inflation to a target range of 1% to 3%. This change is predicated on longer-run structural changes in the economy that are inherently disinflationary, a real neutral interest rate near zero and much slower growth in the economy, all of which have reduced the ... READ MORE >
FOMC comment: Fed follows through on its policy shift
The Federal Reserve followed through on its update of its long-run monetary framework, stating quite transparently on Wednesday that the policy-setting Federal Open Market Committee “will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%. The ... READ MORE >
Savings, the money supply and inflation during a pandemic-induced recession
During the dark ages of economics, the quantity theory of money held forth that the amount of money swooshing through the economy determined everything from inflation to economic growth. An excess supply of money available to the public would chase a limited supply of goods, inducing higher inflation and thereby limiting growth. The changing structure ... READ MORE >