Latest News

Fed Study Suggests Policy Much Tighter Than Rates Alone Suggest


Fed Study Suggests Policy Much Tighter Than Rates Alone Suggest By Bloomberg

Breaking News


Economy 4 minutes ago (Nov 07, 2022 18:44)

© Bloomberg. The Marriner S. Eccles Federal Reserve building in Washington, D.C., U.S., on Friday, July 23, 2021. The Federal Open Market Committee meets next week to decide rates after the chairman recently defended the central bank’s continued support of the U.S. economy even as inflation hits uncomfortable levels.

(Bloomberg) — A San Francisco Fed study found that US monetary policy is likely much tighter than interest rates alone suggest, according to an updated calculation of a proxy measure that takes forward guidance and the balance sheet into account.

Financial conditions implied that the Fed’s benchmark policy rate was above 5.25% in September, compared with the actual target range of 3% to 3.25%, according to the analysis published Monday in the San Francisco Fed’s weekly economic letter. 

“The proxy measure suggests that the stance of monetary policy has recently been substantially tighter than the federal funds rate alone would indicate,”wrote Jason Choi, Taeyoung Doh, Andrew Foerster, and Zinnia Martinez, the study’s authors.

Policy makers have raised interest rates by 3.75 percentage points so far this year, the fastest pace since the early 1980s, as they try to curb the highest inflation in 40 years. Officials delivered a fourth straight 75-basis-point hike last week, bringing the target for the federal funds benchmark rate to a range of 3.75% to 4%. 

The authors’ calculation updates one from 2016 and takes into account the Fed’s balance-sheet reduction program and forward guidance on the path of policy. 

Officials are shrinking their holdings of Treasuries and mortgage-backed securities at a $1.1 trillion annual pace and have repeatedly explained that they expect to keep raising rates to restore price stability. While the Fed only commenced rate hikes from levels near zero in March, their public comments on the need to tighten policy that began months before had already moved the proxy interest rate higher, the authors wrote.

Some Fed officials have begun expressing concern about the central bank potentially moving too quickly with interest-rate increases and risking tipping the economy into a recession by overtightening. When they raised rates last week, the Federal Open Market Committee’s statement explaining the decision said that officials would “take into account the cumulative tightening of monetary policy” and the fact that it acts with a lag.

©2022 Bloomberg L.P.

Fed Study Suggests Policy Much Tighter Than Rates Alone Suggest

Hungary govt could decide on new price caps foodstuffs within days -minister on InforadioBy Reuters – Nov 07, 2022

BUDAPEST (Reuters) – Hungary’s government could decide on fresh price caps on foodstuffs within days to curb inflation, which could be about 25% by the end of the year where it…

COP 27-UK’s Rishi Sunak says climate and energy security go hand in handBy Reuters – Nov 07, 2022

SHARM EL-SHEIKH, Egypt (Reuters) – British Prime Minister Rishi Sunak said on Monday climate and energy security went “hand in hand” and world leaders must act quickly to address…

UK banks were slow to pass on rate hikes to savers, says watchdogBy Reuters – Nov 07, 2022

By Huw Jones LONDON (Reuters) – Britain’s banks were slow to start passing on increases in central bank interest rates to savers and consumers should consider switching to another…

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning

© 2007-2022 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

COP 27-UK’s Rishi Sunak says climate and energy security go hand in hand

Previous article

Why Carvana stock has gotten crushed in the last 2 trading days

Next article

You may also like


Leave a reply

Your email address will not be published. Required fields are marked *

More in Latest News