As widely expected, at Wednesday’s FOMC meeting the Federal Reserve dropped its statement that “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy”, the magic formula that many observers had thought would open the way for a hike in interest rates at the Fed’s June meeting. But the yield on a 10-year U.S. Treasury bond dropped 10 basis points immediately following the FOMC release.
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Category Archives: financial markets
Guest Contribution: “Currency politics, debt politics”
Today, we’re fortunate to have a guest contribution by Jeffry Frieden, Stanfield Professor of International Peace at Harvard University, and author of the newly published Currency Politics: The Political Economy of Exchange Rate Policy (Princeton University Press, 2015). This post is based upon a portion of that book.
The Yield Curve and Economic Activity, Again
The New York Times has an article in The Upshot today, which shows the yield curve over time in a nifty map. They also show the topography for yields in Germany and Japan.
What is the new normal for the real interest rate?
The yield on a 10-year Treasury inflation protected security was negative through much of 2012 and 2013, and remains today below 0.25%. Have we entered a new era in which a real rate near zero is the new normal? That’s the subject of a new paper that I just completed with Ethan Harris, head of global economics research at Bank of America Merrill Lynch, Jan Hatzius chief economist of Goldman Sachs, and Kenneth West professor of economics at the University of Wisconsin, which we presented at the U.S. Monetary Policy Forum annual conference in New York on Friday.
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“Uncovered Interest Parity and Monetary Policy Near and Far from the Zero Lower Bound”
Why do interest rate differentials point in the wrong direction for subsequent exchange rate changes at short horizons, and not at long? And why have interest differentials at long maturities failed in recent years to predict subsequent exchange rate changes as well as in the past, especially for interest rates near the zero lower bound. Those are two topics taken up in a recent paper by myself and Yi Zhang (University of Wisconsin).
Sovereign debt scares– is the U.S. immune?
Many people are finally coming to a realization that should have been evident long ago: Greece’s debts are not going to be repaid. And as discussion turns to who might be next, it seems a good time to revisit the question of whether the United States could some day find itself in similar trouble. I am substantially more optimistic about this than I was a couple of years ago, and here is why.
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Switzerland drops its currency peg
The Swiss National Bank stunned markets on Thursday with an abrupt decision to abandon its commitment since 2011 to hold the Swiss franc at 1.20 francs/euro, as a result of which the franc appreciated almost 20% within the space of a few minutes.
Guest Contribution: “Why Are So Many Commodity Prices Down in the US… Yet Up in Europe?”
Today we are fortunate to have a guest contribution written by Jeffrey Frankel, Harpel Professor of Capital Formation and Growth at Harvard University, and former Member of the Council of Economic Advisers, 1997-99.
Russia: Seems Like Old Times
As I watch the financial meltdown in Russia (and work on a chapter on financial crises), I am pervaded by a sense of déjà vu.
Guest Contribution: “Transparency and the Global Transmission of Financial Shocks”
Today we are fortunate to have a guest contribution written by Luis Brandão-Marques, Senior Economist, Gaston Gelos, Chief of the Global Financial Stability Analysis Division, and Natalia Melgar, Economist, all at the IMF. The views expressed herein are those of the authors and should not be attributed to the IMF, its Executive Board, or its management.