For the first time in 5 years, markets were actually unsure what the Fed was going to do, with yesterday’s fed funds options calling it an even chance that the Fed would settle for a 25-basis-point cut or go all the way to 50. Capital Chronicle had prepared amusing posters as to just how to interpret a 25-basis-point as opposed to a 50-basis-point cut. Fifty it was, disappointing perhaps knzn who wanted a 175-basis-point cut, but delighting economic researchers like Refet Gurkaynak and Eric Swanson who both emailed me their high spirits at finally getting another data point for what happens when the Fed surprises the markets.
Category Archives: Federal Reserve
Four Observations on Import and Export Prices and the Dollar
Some delayed reflections on exchange rates, trade prices, and the messages from the August data.
Catch the wave
I keep trying to warn my friends in the Federal Reserve about the tsunami that’s coming their way.
Saving Glut Redux
Bernanke recaps his interpretation of the explanation for global imbalances. Is it any more convincing than the first time?
By how much will the Fed cut rates?
Once again we’re seeing a big divergence between what the markets expect the Fed to do and what the Fed expects the Fed to do.
The Taylor Rule and the housing boom
Stanford Professor John Taylor presented another very interesting paper at the Jackson Fed conference.
Comments on Housing and the Monetary Transmission Mechanism
Here are the comments that I delivered this morning at the Fed Jackson Hole conference.
Bernanke and Gramlich on the subprime issue
Also featured yesterday at the Federal Reserve conference in Jackson Hole were speeches by Fed Chair Ben Bernanke and former Fed Governor Edward Gramlich.
Report from Jackson Hole
Here are some brief impressions about this morning’s papers at the Federal Reserve conference.
Update on the fed funds market
As noted by Calculated Risk and William Polley, the last few days we’ve seen the return of slightly more normal behavior in the overnight market for fed funds.