Federal Reserve System
In search of a better measure of inflation
Hedonic adjustments offer a way of tackling bias in the CPI, albeit at a cost, but new research suggests even these may be misrepresenting inflation – with broad implications for the economy
San Fran Fed president sees light at end of tunnel
John Williams says when short-term volatility is discounted, the US economy is nearing full employment, with an inflation trend running around 1.5%
NY Fed’s McAndrews warns negative rates could drag inflation down
Director of research highlights some of the more radical unintended consequences that could stem from negative rates, including new forms of currency and inflation moving in unexpected directions
Plosser lays out four principles of sound central banking
Former president publishes a reflective essay in Philadelphia Fed’s annual report for 2014; advocates clear objectives, systematic rules, open communication and stable independence
Chicago Fed research charts fall in natural rate of unemployment
Group of economists say an ageing population and rising education attainment could push the natural rate – currently at or below 5% – as low as 4.5% by 2020
Jobs data recovers in the US as Dudley looks to help small businesses thrive
Non-farm payroll employment increases by 223,000 in April after a difficult March; NY Fed president considers how small businesses can access credit and expand
Yellen says stability risks ‘not elevated’
Fed chair tells Christine Lagarde she does not see ‘the precursors of a financial crisis’, but singles out high stock valuations as a ‘potential danger’
NBER paper challenges Rey’s monetary policy dilemma
Authors find evidence to support the continued existence of a traditional monetary policy trilemma, casting doubt on Hélène Rey’s theory that the trilemma has broken down
San Fran Fed research analyses link between inflation targeting and growth
In an economic letter, two researchers find developing economies tend not to experience the same short-term bump in growth rates as advanced economies after adopting a target
Fed’s Mester calls for more work on monetary policy and financial stability nexus
Loretta Mester sets out three priorities for research on the consumer credit markets in the United States at conference in Philadelphia
Impact of Fed’s QE often larger in EMs than US, research finds
IMF working paper examines cross-border effects of unconventional monetary policy in the United States using a global vector error-correction model
Fed updating supervisory guidance on community banks
A deputy director tells subcommittee in House of Representatives the Fed has ‘several efforts underway’ to provide regulatory relief for community banks
Interview: Manuel Sánchez on shifting financial stability risks
Bank of Mexico deputy governor speaks about monetary policy normalisation in the US, the limits of macro-prudential tools and developing capital markets
Fed’s Claessens challenges banking Balkanisation theories
Theories emphasising the collapse in cross-border credit since the financial crisis fail to capture a ‘secular trend’ towards emerging markets, says Fed senior adviser
Central banks of Colombia and Peru expect bond impact from Fed rate hike
Even though markets are already anticipating a Fed interest rate hike, it will still have an impact on bond markets and asset prices, the governors of the central banks of Colombia and Peru argue
Volcker proposes new regulatory structure with Federal Reserve at its heart
The Volcker Alliance sets out proposals for a new regulatory structure in the US that seeks to address the ‘fragmentation, overlaps and glaring gaps’ in the current system
Bank of Mexico paper warns of EM bond runs
Paper stresses vulnerability in face of Fed lift-off, even with low levels of leverage, noting mechanisms essentially unrelated to degree of leverage can determine financial stability
Mexican deputy tells EMs to assume US rate hike coming ‘sooner rather than later’
Javier Guzmán Calafell advises emerging markets to prepare ‘as fast as possible for a worst-case scenario’ in anticipation of the Federal Reserve tightening policy later this year
Europe/US policy divergence ‘good news’ for monetary system, says top central banker
Spill-overs should not be a factor in monetary policy decisions; precedents for European and US policy to diverge, says top-level European central banker
Nothing magical about targeting 2%, Bernanke says
Former Fed chair calls for further research on ‘alternative intermediate targets’ for monetary policy during IMF panel; will work with hedge fund Citadel as adviser on range of topics
Fed presidents still divided on timing of rate hike
Heads of the Federal Reserve Banks in Atlanta, Boston and Cleveland offer different takes on current economic conditions; all united in desire for more data
Sri Lanka, Indonesia take different tacks despite common imbalances
Central Bank of Sri Lanka cuts interest rates while Bank Indonesia holds; both banks are grappling with external deficits, making them vulnerable to outflows
Fed research: Three channels of shadow banking fragility
Working paper models the increased fragility created by shadow banks, even though they provide higher levels of credit to the economy
FOMC minutes: Fed cautious about June rate hike
Minutes highlight split in views of those who think rates should rise in June and those who would rather wait; Dudley and Powell give speeches urging care