monetary policy

Fed Chair nominee Janet Yellen believes that the Fed will keep rates at zero long after the 6.5 unemployment threshold, according to news reports. Yellen made the comments responding to an inquiry by Massachusetts Senator Elizabeth Warren…

In the aftermath of the financial crisis, policy makers’ aversion to fiscal policy is still large. So monetary policy rules the roost. With developed economies burdened by low growth, unemployment, and high levels of debt, monetary agents…

On Thursday, Philadelphia Federal Reserve President Charles Plosser gave a speech on Thursday called “A Limited Central Bank” that I highly recommend. The underlying theme of Plosser’s speech was that central banks should have a limited…

Over the past few months, the world’s central banks have turned to forward guidance as a central focus of monetary policy. This tool is untested as a central component of monetary policy and has been thrust into the spotlight only because…

In September I wrote that I expected the Fed to establish a lower bound for inflation threshold as one of its next moves. The rationale was two-fold. First, inflation is undershooting and the Fed needs policy space to deal with unwanted…

The following are prepared remarks by Janet Yellen for her first meeting with Congress after being nominated to replace Ben Bernanke as the Federal Reserve Chair

Earlier today, I indicated that comments by Fed President Dennis Lockhart clearly indicated that the Fed was poised to shift away from quantitative easing and toward forward guidance to guide future Fed monetary policy. But Lockhart gave a…

Comments by top Federal Reserve officials support the idea that the Fed is going to move away from quantitative easing as a policy tool and lean more heavily on forward guidance. There are a number of reasons for this, not the least of…

According to an account in the Financial Times last week, the latest rate cut by the ECB created a worrying north-south split, with the German-centered group opposing rate cuts and the southern faction wanting them. Today Austrian and…

The German-language media have been voicing concerns over the ECB’s low interest-rate policy and its effect on savings and investment in the euro zone. This makes sense given the state of the economy in Germany and Austria is significantly…