time inconsistency

The title of this post is what the Fed wants us to believe. It wants us to believe that it is prepared to raise interest rates this year but that it will increase them slowly by assessing the data, hiking once and re-assessing, and then…

The biggest takeaway from the latest Federal Reserve Open Market Committee meeting was the reduction in the ‘normal’ rate of unemployment from the 5.2-5.5% range to a 5.0-5.2% range. While the Fed did remove its ‘patient’ language regarding…

As I have been intimating for the last few months, the United States is in the midst of a regime change in monetary policy. We are moving from quantitative easing to forward guidance as the main unconventional policy tool to guide Federal…

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…

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…