Federal Reserve Articles

What to Expect in the Year Ahead

An economist's notes.
12:01 AM, Dec 26, 2015

Guilty as charged. That's my response to anyone who accuses me of having spilled too much ink writing about what Janet Yellen might do, has done, and will do now that she has raised the Fed funds rate for the first time in a decade. By way of expiation, here is a look at some less-heralded developments in the American economy that may well determine its performance in 2016 and beyond.

Top of the list for immediate impact is the end of austerity. One effect of political stalemate was a "sequester", something of a freeze on the growth of government spending, a consequence of which was a decline in the federal deficit as a portion of GDP.

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After the Rise

12:01 AM, Dec 19, 2015

If it were done when 'tis done, then 'twere well it were done slowly. That is official Federal Reserve Board going-forward policy. The announcement of the Fed's first interest rate increase in almost a decade, an upward move of 0.25 percent from near zero, says, and twice, that future increases will be "gradual". That was chairwoman Janet Yellen's main message – abrupt is bad, "gradual adjustment in the stance of monetary policy" is the way to go to avoid past central bank errors by waiting so long that it has to jack rates up abruptly, throwing the economy back into recession. The mid-range forecast of Fed policymakers is that the federal funds rate – an important tool in the Fed's policy kit – will rise to

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Pulling Away Punch Bowls

Book Review: Wall Street, the Federal Reserve, and the Stock Market, by Elmus Wicker.
2:10 PM, Dec 16, 2015

Saturday's Wall Street Journal revealed that the Federal Reserve has been conducting numerous exercises to explore would it could to arrest the growth of asset bubbles as well as the risks inherent in doing such a thing (as opposed to nothing about it, which has been the standard operating procedure for some time).

That the Fed is thinking anew about how it should react to such a financial crisis is welcome news, but it's wrong to think of it as a new development. After the 1929 stock market crash and the ensuing Great Depression, both of which were made significantly worse by the Fed's sins of omission--and commission--before and during the crisis, the Fed realized it needed to assign itself this task.

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Here Comes the Interest Rates Rise

12:01 AM, Dec 12, 2015

"I'll build a stairway to Paradise," promised songwriter George Gershwin decades ago. Fed chairwoman Janet Yellen is about to try to do the same, taking interest rates up that stairway, from the zero level set during the hellish days of the financial crisis to the Paradise of normality or near-normality. There is almost unanimous agreement – an 85 percent probability according to markets -- that next week the Federal Reserve Board's monetary policy committee will raise interest rates by 0.25 percent, bringing the era of zero interest rates to an end. Unless, of course, Yellen & Co. belie the hints its chair has been dropping and double-cross the markets.

Yawn if you will, and with reason: There is unlikely to be

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Goldman's Inexplicable Grip on the Fed

5:08 PM, Nov 12, 2015

What kind of skills might be essential for someone to be head of a Federal Reserve Regional Bank? If your response is a basic knowledge of monetary policy and a deep understanding of financial markets you are mistaken: The answer is, apparently, experience at Goldman Sachs.

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Fact Checking Politico's Federal Reserve Fact Check

1:02 PM, Nov 11, 2015

One of the big problems with media "fact checkers" is the presumption of expertise that the reporter doesn't actually have. Sitting around googling whenever a politician opens his or her mouth often means a rush to judgment, and the results can be embarassing. Last night, Politico Pro sent out the following story:

Fact check: The president can’t fire Yellen
By Jon Prior

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The Fed's Continuing Conundrum

11:01 PM, Oct 30, 2015

Coming soon to a central bank near you, in time for the Christmas shopping season, an increase in interest rates, courtesy of Janet Yellen and her colleagues on the Federal Reserve Board’s monetary policy committee. Or perhaps not. Folks living in euroland can expect the gift that keeps on giving, unless it doesn’t, more monetary stimulus. China works on a different calendar, so its people have already unwrapped their gifts, a cut in interest rates and assorted credit-easing measures.

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Cruz's Golden Moment

12:10 PM, Oct 30, 2015

Interesting political debates typically have what could be called primary effects. In Wednesday night's case, those would include the Bush-Rubio exchange, which did a lot of good for Rubio and a lot of damage to Bush, and the Cruz assault on the moderators, which was dazzling.

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Still Chaste, and Likely to Remain So

Yellen's Augustinian monetary policy.
11:01 PM, Sep 18, 2015

The U.S. economy is chugging along. Not at high speed, but at a steady 2.25 percent annual rate, with retailers stocking up in anticipation of a very merry holiday season. The unemployment rate is down to 5.1 percent, according to the Federal Reserve Board headed lower to its “long-run normal” rate, and employers in many sectors are scrambling to find workers with the skills they need.

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Eleven Days to Fed’s Decision Day

11:00 PM, Sep 04, 2015

“A fact can be a beautiful thing,” sings one of the characters in the award-winning musical, “Promises, Promises.” True. Unfortunately, a gaggle of facts can be somewhere between confusing and a curse, especially if you are a central banker who has specialized in promises, promises that a process of normalization will begin after seven years of zero interest rates. Now, faced with its next meeting less than two weeks hence, the Federal Reserve Board’s monetary policy committee has to decide whether to replace promises with action.

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8:14 AM, Sep 04, 2015

The eagerly anticipated jobs report for August has come in and it is a disappointment … sort of. Expectations were for an increase of 217,000 jobs. The number was … 173,000. But

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Pathetic Spin from Goldman Sachs

2:18 PM, Aug 19, 2015

A former Goldman Sachs executive just got named to an important job in the Federal Reserve system and if you think that’s a problem then you just may be an anti-Semite. Or maybe it’s that you don’t appreciate diversity.

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2,417 Days and Counting...

11:01 PM, Jul 31, 2015

Hurry up and wait. Hurry to the announcement by the Federal Reserve Board’s monetary policy committee, and then wait for the next one. After 2,417 days of keeping its key interest rate at zero, on Wednesday of last week the Fed policy team decided that a few more weeks or months at that level might be a good idea. The Fed knows that zero is not a sustainable level for interest rates, but also wants to be certain it doesn’t abort the none-too-robust recovery.

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The Federal Reserve’s Inequality Problem

3:29 PM, Apr 13, 2015

Federal Reserve Chair Janet Yellen has devoted time of late to discussing the significant problem of inequality. At a conference on April 2nd, Ms. Yellen urged that research be undertaken “to understand whether any policies may hold people back or discourage upward mobility.” Perhaps such research might start at the doorstep of the Federal Reserve because the Fed’s sustained policy of near-zero interest rates has increased inequality, as well as made it more difficult for the middle class to climb the economic ladder.

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Banks Under Stress

11:01 PM, Mar 13, 2015

So all’s well. No more financial meltdowns. No more taxpayer bailouts of bonus-hunting, risk-taking bankers. The Federal Reserve Board’s regulators have decided that all 31 of the largest U.S. banks, including seven that are foreign-owned, would survive a severe recession with sufficient capital to continue lending and remain in business without a taxpayer bailout.

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The Meaning of Walmart's Wage Hike

12:01 AM, Feb 21, 2015

Markets work. That’s the message from Walmart’s decision to raise its starting wage for 500,000 of its 1.3 million US employees to $10 per hour starting next year. That’s 37% above the statutory minimum of $7.25.

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Inflation and Stagnation: A Political Opportunity?

2:20 PM, Aug 28, 2014

At the Washington Post, Christopher Ingraham demonstrates through one chart "why it feels like the recession never ended."

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Rasmussen: Americans Are Worried About Inflation

Majority don't trust Fed to fix it.
12:01 PM, Aug 25, 2014

Things are getting more expensive, and the American people know it. A new poll from Rasmussen Reports found three-quarters of Americans say they are concerned about inflation, with 81 percent saying they are paying more for groceries and 71 percent saying they expect to pay even more for groceries a year from now. Here's more:

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The Politics of Money

Go bold with gold.
Jul 21, 2014

Republicans are searching for big, bold ideas that will inspire voters to embrace a conservative agenda. To unite its disparate segments, the GOP needs to uphold our nation’s founding principles—a key requirement for Tea Party adherents—while fostering the aspirations of those who believe the United States should play a strong leadership role in the world. A prime opportunity presents itself in the most compelling problem America faces: the need to restore confidence in its economic future.

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Is the Federal Reserve Killing Growth?

11:20 AM, Apr 28, 2014

Everybody seems to agree that the U.S. Federal Reserve's quantitative-easing program, which involves buying bonds to lower interest rates, plays a role in spurring economic growth. Folks differ on whether the contribution to growth outweighs the risk of inflation. 

But what if the Fed's efforts are actually hurting growth, and the feared inflation has already arrived?

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The Fed and Inequality

Zero interest rates have side effects.
Feb 17, 2014

Income inequality in the United States has been increasing for a generation. The share of pretax income received by the top 1 percent of earners rose from 7.8 percent in 1973 to 17.4 percent in 2010. A broader and widely used measure of inequality—the Gini coefficient—indicates that inequality for the entire range of income recipients rather than only the top 1 percent has risen by 26 percent since the early 1970s.

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No Statistics, No Mischief

A modest proposal for the new Fed chairman.
Jan 27, 2014

It's been more than a week now and I’m beginning to suspect she’s not going to call, so here I will offer Janet Yellen the advice I’ve been hoping to give her privately since the Senate confirmed her as the new chairman of the Federal Reserve. My advice is: Think about John Cowperthwaite. By this I mean: Really think about 

John Cowperthwaite.

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A Curious Form of ‘Populism’

Bill de Blasio and Wall Street.
Nov 25, 2013

First, a matter of numbers and nomenclature: Bill de Blasio, who is being hailed like Eliot Spitzer before him as the new face of American liberalism, won his race to be New York City’s next mayor with a near-record victory margin but also record low turnouts in both the primary and the general elections. There was no “populist” surge as reported in the press. De Blasio won 40 percent of the 22 percent who showed up for the Democratic party primary.

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Podcast: The Fed and the Status Quo

Hosted by Michael Graham.
3:50 PM, Sep 19, 2013

THE WEEKLY STANDARD podcast with the American Enterprise Institute's James Pethokoukis on the recent actions by the Federal Reserve.

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When Will We Recover From This 'Recovery'?

9:53 AM, Sep 19, 2013

Yesterday, the Fed decided that the economy was not yet sufficiently robust for it to "taper." Wall Street celebrated.

Today, the consumer put in his two cents, which is about what he thinks this "recovery" is worth. As Ben Schenkel at Bloomberg writes:

Consumers views of the U.S. economic outlook deteriorated in September to the weakest level in a year as higher borrowing rates started to chip away at progress in the housing market.

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Job Growth Tapers Despite Summers' Growth

11:00 PM, Sep 06, 2013

It’s not that anyone here in Washington begrudges Britain, and to some extent Spain, their fledgling recoveries. But President Obama and other proponents of more government spending aren’t delighted that those nations’ austerity programs seem to be paying off in renewed growth rather than in the perpetual recession the Keynesian try-another-stimulus-crowd in the White House has been predicting. Conservatives are saying that the austerity sauce for the British roast beef would be just as tasty on the U.S. hot dog.

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The Real Fed Sweepstakes

It’s policy that counts, not personalities.
Aug 12, 2013

At first, it was fun—this parlor game of guessing who the Obama administration will appoint as the next chairman of the Federal Reserve. We all assumed it would be Janet Yellen, because she’s a woman. And then suddenly we had Larry Summers all over the leading financial newspapers receiving multiple endorsements from respected economists. There were sly references to his intellectual prowess and invaluable experience, not to mention (but they always did) his connections with Obama’s closest advisers on economic and financial matters.

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Did Janet Yellen Predict the Recession?

No, no, and no.
11:31 AM, Jul 31, 2013

Have you heard the news? Janet Yellen is positively clairvoyant!

Yellen, vice chairman of the Federal Reserve and, evidently, a front-runner to replace Ben Bernanke as chairman in several months, “was one of the first members of the Federal Open Market Committee . . . to realize that the [housing market’s troubles] could cause a major recession.” (Alan Blinder, Wall Street Journal, July 29.)

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Bernanke Prepares His Legacy, Obama Prepares to Pick a Successor

11:00 PM, Jul 19, 2013

Data-driven, legacy-driven. Keep those two descriptives in mind and you will know a good deal about the prospects for a dialing back of asset purchases—“tapering”—by Federal Reserve Board chairman Ben Bernanke.

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Spring Swoon

11:00 PM, Apr 26, 2013

The U.S. economy grew at an annual rate of 2.5 percent in the first quarter, well ahead of the paltry 0.4 percent in the final quarter of 2012.

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