All eyes on the Fed


2019/05/09 16:12

Last week the US Federal Reserve left the federal funds rate unchanged and lowered the interest rate on excess reserves. We review economists’ recent views on the monetary policy conduct and priorities of the United States’ central bank system.


The Federal Open Markets Committee (FOMC) held its third meeting of 2019 last week (April 30th and May 1st). Given the very recent change in monetary policy stance, there was no great anticipation of interest rate changes. However, despite how predictable the conclusions of the FOMC meeting were, the blogosphere still took it as an opportunity to come forth with insights both on the future of the Fed’s monetary policy instruments and on its governance.


A first line of opinions assesses the aftermath of the Fed’s latest dovish turn. Some are sceptical: Tim Duy from FedWatch argues that, while last week’s monetary policy meeting did not yield any fundamental changes, the Fed may soon reverse this path and go back to a hawkish approach. This scenario is not crystal clear – rate hikes are not foreseeable given forecasts of inflation alone, and Fed officials such as Charles Evans and Eric Rosengreen have been vocal about policy strategies allowing for above-target inflation.

第一线意见评估了美联储最近温和转向的后果。一些人持怀疑态度:FedWatch的Tim Duy辩称,虽然上周的货币政策会议没有产生任何根本性的变化,但美联储可能很快就会逆转这条道路并重新采取鹰派态度。这种情况并不是很清楚 - 鉴于通胀预测本身就不可预见加息,而查尔斯·埃文斯和埃里克罗森林等美联储官员一直在谈论允许高于目标通胀的政策策略。

Still, Duy lists three scenarios under which a policy reversal – a ‘Dove Trap’, as he calls it – could take place. First, if growth, labour-market and inflation numbers outperform expectations; second, if unemployment numbers are lower than anticipated; third, and last, if the Fed deems that we are too late in the current economic cycle to experiment with persistently above-target inflation, leaving changes in the Fed’s policy strategy for the next cycle. “Any talk of catch-up strategies in which the Fed makes up for low inflation by targeting higher inflation, for example, may only be in preparation for the next recession. In that case, it has little if any relevance for the near-term outlook.”

尽管如此,Duy还列出了三种可能发生政策逆转的情景 - 一种“鸽派陷阱”,正如他所说的那样。首先,如果增长,劳动力市场和通胀数据超出预期;第二,如果失业人数低于预期;第三,也就是说,如果美联储认为我们在当前的经济周期中为时已晚,以试验持续高于目标的通货膨胀,那么美联储的下一周期政策战略就会发生变化。例如,任何有关美联储通过瞄准更高通胀来弥补低通胀的追赶策略的谈论,可能只是为下一次经济衰退做准备。在这种情况下,它几乎与近期前景无关。“

Others, such as Christophe Donay from Pictet, take a more upbeat stance. Donay points out that the Fed’s dovish turn and the promise “to be patient on further rate hikes” has helped markets in the beginning of the year. Signals that the end of balance-sheet reductions is near have calmed market concerns about the prospect of tightening financial conditions. Donay wonders whether this turn also means a turn of the page in central-bank policymaking – the low interest rates and the end of the economic cycle will force central banks to be creative in the event of a downturn.

其他人,比如Pictet的Christophe Donay,采取了更乐观的立场。多内尔指出,美联储的鸽派转变以及“在进一步加息时保持耐心”的承诺在今年年初帮助了市场。资产负债表减少结束的信号已经让市场对收紧财务状况的前景感到平静。 Donay想知道这一转变是否意味着中央银行决策的转变 - 低利率和经济周期的结束将迫使央行在经济衰退时发挥创意。

Indeed, some have already started questioning the instruments that the Federal Reserve has at its disposal to manage the economy. While the Fed has so far mostly relied on the federal funds rate, Bill Dudley, former president of the Federal Reserve Bank of New York, writes that this target has “outlived its usefulness”. As a result of quantitative easing, he explains, banks have accumulated reserves that in turn reduce their need of borrowing or lending federal funds. As a consequence, the interest rate on reserves “has become the Fed’s most effective tool of monetary policy, putting a floor under the interest rates at which banks are willing to lend”. Dropping the federal funds target and focusing solely on the interest rate paid on reserves, Dudley argues, “would have no meaningful effect on the Fed’s monetary policy stance” and would simplify policies by “eliminating the need for technical adjustments to the interest rate on reserves to ensure that the federal funds rate stays within its range”.

事实上,一些人已经开始质疑美联储为管理经济所拥有的工具。虽然美联储迄今为止主要依赖于联邦基金利率,但纽约联邦储备银行前主席Bill Dudley写道,这一目标“已经过时了”。他解释说,由于量化宽松政策,银行积累了储备,从而减少了借贷或贷款联邦资金的需求。因此,储备利率“已成为美联储最有效的货币政策工具,在银行愿意放贷的利率之下”。Dudley认为,放弃联邦基金目标并专注于储备利率,“对美联储的货币政策立场没有任何实质性影响”,并将通过“消除对储备利率进行技术调整的必要性来简化政策”确保联邦基金利率保持在其范围内“。

Currently the Fed operates monetary policy in what is called a “floor system”, whereby the target interest rate is equal or very close to the interest rate on excess reserves (IOER). David Beckworth, from MacroMusings, argues that this could soon enough turn into a “corridor system”, where the overnight interest rate is above the IOER. This transition from floor to corridor could be caused by a large shift in the demand for reserves, moving the Fed off “the perfectly elastic or ‘flat’ portion of the bank reserve demand curve”. The shift could happen with or without a significant reduction in the supply of reserves. “The Fed, in other words, could have a relatively large balance sheet and still end up in a corridor operating system.”

目前,美联储在所谓的“下限系统”中实施货币政策,目标利率等于或非常接近超额准备金利率(IOER)。来自MacroMusings的David Beckworth认为,这很快就会变成一个“走廊系统”,隔夜利率高于IOER。这种从下限到走廊的过渡可能是由于准备金需求的大幅度转变,使美联储摆脱了“银行准备金需求曲线的完全弹性或”平坦“部分”。无论是否有显着的准备金供应减少,都可能发生这种转变。换句话说,美联储可能拥有相对较大的资产负债表,并最终落入走廊操作系统。“

With regard to governance, Dudley highlights it as an impediment to the change in interest-rate priorities. More precisely, the future of the Board of Governors has also been a heated theme. Tyler Cowen from the Marginal Revolution drafts a supermarket list for the attributes of an ideal candidate: a record of practical managerial experience, a reasonable diplomat with some “measure of gravitas”, “high credibility with other Fed board members, most of all the chair”, “strong political skills” given the several interactions with the media, and – not least important – “well-informed views, however you might define them, on monetary policy and regulation”.

在治理方面,Dudley强调这是改变利率优先事项的障碍。更准确地说,理事会的未来也是一个激烈的主题。来自Marginal Revolution的Tyler Cowen列出了理想的候选人的特征:实际管理经验的记录,一定重量级的学位,“其他美联储董事会成员的信任,最重要的是主席“,”强有力的政治技能“——考虑到与媒体的多次互动,并且 - 尤其重要的是 - ”“关于货币政策和监管见多识广的观点”。

Scott Sumner from The Money Illusion weighs in and adds personal integrity to the list, but also vouches for a more decentralised Fed. In his view, a committee composed entirely of experts on monetary policy and another committee of experts on bank regulation “would allow more weight to be placed on expertise for monetary policymakers, and relatively less weight on managerial skills”.

来自The Money Illusion的Scott Sumner为这个名单增添了个人诚信,同时也为更加分散的美联储提供了保证。在他看来,一个完全由货币政策专家和另一个银行监管专家委员会组成的委员会“将允许更多地考虑货币政策制定者的专业知识,并且对管理技能的重视程度相对较低”。

Gregory Mankiw boils down the past success of the Fed “as a public institution” to two ingredients – first, its nonpartisan and widely shared mandate and objectives; second, the quality of their human resources, ranging from their research assistants to the board of governors. The latter group typically possesses either “proven expertise as an economist or substantial experience working in the financial sector” and is appointed for 14-year terms, a long enough term that is meant to keep the governors independent from political pressures.

Gregory Mankiw将美联储“作为一个公共机构”的成功归结为两个因素 - 首先是其无党派和广泛分享的任务和目标;第二,他们的人力资源质量,从他们的研究助理到理事会。后者通常拥有“经验丰富的经济学家或在金融领域工作的丰富经验”,并任命为期14年,足够长的任期,旨在使官员不受政治压力的影响。

Mankiw says nominees of the likes of Cain and Moore to the Fed Board are “simply not qualified” and he was “hoping that the Senate will reject them if they are nominated”. Krugman also expresses reservations with regard to Moore, and remarks that his past evaluations of the Fed’s policy, which have “always been wrong”, have gone unquestioned by the Republican senators so far. Both the candidates have since withdrawn.


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