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 ... READ MORE >
interest rates
Major policy shift at the Federal Reserve: average inflation targeting
Federal Reserve Chairman Jay Powell on Thursday announced a significant shift in the central bank policy regime that moves away from its long held Phillips Curve-based trade-off between employment and inflation. This will provide the Federal Reserve more room for accommodation in an era of zero interest ... READ MORE >
Fed intervenes in credit markets, but will it be enough?
The Federal Reserve along with its major central banking partners moved on Sunday to restore functioning credit markets in an attempt to put a floor under the global economy and calm financial markets. The Fed announced a restoration of quantitative easing to the tune of $700 billion. In addition, the ... READ MORE >
Bank of Canada lowers policy rate in response to health crisis
The Bank of Canada on Wednesday reaffirmed its commitment to the G-7 to address the threat to the economic growth posed by the outbreak of the coronavirus. Canada’s central bank moved aggressively to drop its policy rate by 50 basis points, to 1.25%, following action taken by the Federal Reserve on ... READ MORE >
Federal Reserve meeting suddenly becomes interesting as coronavirus spreads
What was shaping up as one of the most boring policy rate decisions in some time has suddenly gained a measure of uncertainty because of investor concern about the coronavirus. Over the past several days the U.S. 10-year Treasury yield has declined by 21 basis points, from 1.82% to roughly 1.61%. While ... READ MORE >
As the coronavirus spreads, bond markets take notice
For a while last year, it seemed that yields on U.S. Treasuries were on an upward path as trade tensions with China eased and recession fears calmed. But all that has changed as fears over the outbreak of the coronavirus in China have combined with moderated corporate earnings and continued delays over ... READ MORE >
Holding interest rates steady, Bank of Canada keeps the door open for a cut
The Bank of Canada held its overnight interest rate at 1.75% on Wednesday as the central bank kept its powder dry ahead of an uncertain path of growth in the domestic economy in 2020. The tone of the policy statement would imply that the Bank of Canada stands ready to cut rates to bolster the domestic ... READ MORE >
The Bank of Canada’s dilemma — stability versus rate cut
Canadian money markets imply that the Bank of Canada will remain on hold at 1.75% at the interest rate announcement on Jan. 22. The implied probability of a rate change that day is nearly zero, according to the futures market. But we do think that the decision is a close call. While maintaining the ... READ MORE >
Fed leaves rates unchanged and points to shift on inflation target
The Federal Open Market Committee on Wednesday said it had retained its accommodative policy stance by keeping the federal funds rate in a range between 1.5% and 1.75%. Based on recent strong labor market reports, the Fed revised its unemployment forecast from 3.7% to 3.6% for 2019 and from 3.7% to 3.5% ... READ MORE >
Fed preview: Difficulty and divided FOMC
Monetary policy is difficult under the best of circumstances. The cross currents of the trade war, a modest exogenous supply shock in oil markets, political pressure from the executive branch to reduce interest rates and former colleagues suggesting the Federal Reserve get political make the rate decision ... READ MORE >