21世纪货币政策

• 目送飞鸿

  2022-07-04
  The value of the neutral interest rate, R*, which helps determine total monetary firepower, is however another source of uncertainty for policymakers. The value of R* can’t be observed, only estimated, and, as we’ve seen, the Fed’s estimates of this key variable have fallen substantially over time. For the United States, consistent with the Fed’s 2021 estimate of 2.5 percent, most studies currently estimate the nominal neutral rate to be in the range of 2 to 3 percent—or, 0 to 1 percent in real, inflation-adjusted terms, assuming inflation expectations are close to the Fed’s 2 percent target.
• 目送飞鸿

  2022-07-04
  My main finding was that QE, supplemented by forward guidance that commits policymakers to lower-for-longer rate policies, can provide the equivalent of about 3 additional percentage points of policy space. In other words, if the neutral interest rate is 2.5 percent, forceful use of QE and forward guidance can provide the Fed with total monetary firepower equivalent to roughly 5.5 percentage points of traditional rate cuts—close to its normal response to typical recessions before the lower bound became a problem. However, in a deeper-than-average recession that requires more than 5.5 percentage points of policy response, even forceful use of the new monetary policy tools would probably prove insufficient to compensate fully for the effects of the lower bound.…However, given the many assu...
• 目送飞鸿

  2022-07-04
  Although the effectiveness of new monetary tools depends on many factors, we have seen that a key determinant is the level of the (nominal) neutral interest rate, R*.
• 目送飞鸿

  2022-07-03
  As the tightening got underway, the FOMC had to decide whether to continue using its new ample reserves framework or, instead, return to its precrisis scarce reserves approach. In January 2019 the FOMC permanently adopted the ample reserves approach. This framework was more straightforward. It did not require continuous monitoring and adjustment of the supply of reserves to keep the policy rate at its target—one reason that the ample reserves approach had long been used by most major central banks. And it had at least two other important advantages: First, the Fed might at some point again have to resort to QE, expanding its balance sheet and the quantity of bank reserves. If so, the ample reserves approach would facilitate raising the funds rate when the time came to exit, as it had from ...
• 目送飞鸿

  2022-07-03
  Before the financial crisis, the FOMC had implemented monetary policy through what was known as a “scarce reserves” regime. The Fed controlled the federal funds rate by varying the supply of reserves in the banking system, which it accomplished by either selling Treasury securities in the open market to drain reserves or buying them to add reserves. This approach required close monitoring of banks’ demand for reserves.…With the advent of quantitative easing in 2008, the Fed effectively transitioned to a new operating framework, known as an “ample reserves” system. Because the Fed paid for its securities purchases by creating bank reserves, banks after the crisis collectively held far more reserves than in the past. With reserves far exceeding their typical daily needs, banks had little r...
• 目送飞鸿

  2022-07-03
  In 2017, the Fed’s balance sheet at last began to shrink. In June, expanding on its earlier statement of principles, the FOMC released more details about how it would proceed. Beginning in October—exactly three years after QE3 had ended—it would reinvest only a portion of the proceeds from maturing securities in new securities. The monthly reduction in the balance sheet would be capped, but the allowed reduction would gradually increase over time. As previously announced, the Fed would not sell nonmaturing securities. This passive, predictable approach—as exciting as “watching paint dry,” as Philadelphia Fed President Patrick Harker put it—was intended to minimize market uncertainty.…The FOMC’s “paint drying” approach meant the process would be slow—in practice, most of the reduction in ...
• 目送飞鸿

  2022-07-03
  What implications do these changes in inflation dynamics—the flatter Phillips curve and better-anchored inflation expectations—have for monetary policy and the economy? On the positive side, with inflation more stable and less likely to react to changes in unemployment, monetary policymakers have more scope to ease policy in response to recessions.…These outcomes are the most important payoff of Volcker’s restoration of the Fed’s anti-inflation credibility in the 1980s.There are downsides, however. A flat Phillips curve means that inflation is a less reliable indicator of economic overheating. Should inflation get too high, the costs, in terms of unemployment, of bringing inflation back down to target could be higher than in the past. And although the Fed’s anti-inflation credibility g...
• 目送飞鸿

  2022-07-03
  But, at least in retrospect, the evidence strongly suggests that the behavior of inflation was itself changing, in at least two distinct ways. First, after 1990 or so inflation began to respond less than before to short-run changes in unemployment (or other measures of economic slack).…The second important change in the behavior of inflation was that, again after about 1990, inflation appeared to have become much more stable from year to year. Although economic shocks, like large changes in oil prices, could still drive overall inflation up or down temporarily, it tended to quickly revert to its preestablished level—rather than spiraling to a new level, as had happened during the 1970s.
• 目送飞鸿

  2022-07-03
  In any case, whatever its source, slower potential growth in the decade after the crisis implied lower returns to new capital investments, which—together with other factors, including increased global saving and modest inflation—can explain the apparent decline in the neutral interest rate, R*.
• 目送飞鸿

  2022-07-03
  The initial exit from the crisis-era regime began in December 2013, near the end of my term, when we decided to begin slowing QE3 purchases, pending continued improvement in the labor market. The last purchases were made, under Yellen, in October 2014. They marked the end, at least for a time, of the rapid postcrisis growth of the Fed’s balance sheet. At that point, the balance sheet stood at $4.5 trillion, compared with $875 billion in August 2007.
• 目送飞鸿

  2022-07-01
  Finally, on October 8 (2008), at 7:00 a.m. in New York and Washington, the Fed, the ECB, the Bank of England, the Bank of Canada, the Swiss National Bank, and Sweden’s Riksbank each announced rate cuts of half a percentage point. The Bank of Japan (BOJ), with rates already near zero, expressed strong support. We had not consulted with the People’s Bank of China, but it too cut rates that morning.
• 目送飞鸿

  2022-07-01
  †† Reserve Bank discount-window officers discouraged routine borrowing from the window because, until 2003, the discount rate was set below market (below the federal funds rate) and they did not want banks to exploit the window as a regular source of cheap funding. Thus, to borrow from the window, a bank had to show it could not borrow in the market. The discount rate fell below the federal funds rate in the mid-1960s because, according to Federal Reserve staff lore, it was politically easier for the FOMC to tighten monetary policy by raising the federal funds rate, which was done without public announcement until 1994, than it was to raise the discount rate, which of necessity must be announced to banks. Effective in January 2003, following a review of lending procedures, the primary disc...
• 目送飞鸿

  2022-06-30
  In part because of these practical difficulties, the Committee would abandon its monetarist framework after only three years, in October 1982, returning to its traditional approach of targeting the funds rate.
• 目送飞鸿

  2022-06-30
  As modified by the experience of the 1970s and the insights of Friedman, Phelps, and others, the Phillips curve remains a centerpiece of economists’ thinking about inflation today. To summarize, in its contemporary form, the Phillips curve makes three assertions:First, economic expansion, when driven by increases in demand not matched by increases in supply, will ultimately lead to higher inflation, in both wages and prices. This is the message of the original 1958 Phillips curve and of the research that followed Phillips’s paper.Second, supply shocks are stagflationary, raising inflation but lowering output and employment, at least for a time. This was the experience following the oil price shocks of the 1970s.Third, holding constant the level of unemployment and the effects of supp...
• 目送飞鸿

  2022-07-03
  Under its FAIT framework, the FOMC had sought a temporary overshoot of its inflation target. The risk was that the overshoot would go too far and persist for too long.
• 目送飞鸿

  2022-07-03
  Inflation posed another, increasingly worrying, threat. Some economists, including Larry Summers, Olivier Blanchard (the former chief economist of the IMF), and Jason Furman (former head of Obama’s CEA), voiced their concerns that the combination of powerful fiscal stimulus, accumulated household savings, and easy monetary policy would overheat the economy, leading either to the return of 1970s-style inflation or to a hasty tightening by the Fed that would disrupt the economy and markets.
• 目送飞鸿

  2022-07-03
  In its new strategy the FOMC agreed to take a more agnostic view about u*. It would push for lower unemployment until inflation or other signs of overheating provided tangible evidence that maximum employment had been reached. Undeniably, that strategy would carry some risk that inflation would rise too high, forcing a sharp policy response. But the FOMC saw that risk as limited by the flat Phillips curve and well-anchored inflation expectations.
• 目送飞鸿

  2022-07-03
  The second major change to the Fed’s framework was a more proactive approach to ensuring full employment. In his speech, Powell said that monetary policy would henceforth respond only to shortfalls of employment from its maximum level, rather than to deviations (either shortfalls or overshoots) from that level. In other words, the FOMC would no longer tighten policy simply in response to low or falling unemployment—unless there also were “signs of unwanted increases in inflation” or other risks, to financial stability for example.Since William McChesney Martin, Fed chairs had often opted for pre-emptive strikes on inflation, beginning policy tightening before the preconditions for higher inflation—including an overheated labor market—are in place. The rationale was that monetary policy w...
• 目送飞鸿

  2022-07-03
  As a result of its review, the FOMC approved two principal changes to its policy framework. First, in pursuing its inflation goal, the Committee would henceforth try to make up for past undershoots (though not overshoots) of the inflation target. If inflation ran below 2 percent for a time, as it had through most of the expansion following the Great Recession, the Committee would compensate by allowing inflation to run “moderately above 2 percent for some time.” The goal of the new approach would be to keep inflation near target on average.…Powell dubbed the new makeup strategy “flexible average inflation targeting,” or FAIT. It was flexible in several senses. In keeping with the dual mandate and the approach we adopted in 2012, it would require the Committee to take account of employmen...
• 目送飞鸿

  2022-07-03
  More benignly, the downward drift in the natural rate of unemployment, a flatter Phillips curve, and well-anchored inflation expectations looked to have given the Fed more room to push for a “hot” labor market with less concern about too-high inflation.