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Stephen Williamson: New Monetarist Economics

Stephen Williamson, Vice President of the St. Louis Fed, guides his readers through a very in-depth view of current monetary policy and economics. This blog is recommend for people with a deep knowledge in economics and math.

Sorry You’re Let Down By the Fed’s Monetary Policy Review

On Thursday, the FOMC released a revised Statement of Longer Run Goals and Monetary Policy Strategy, and Jay Powell made a speech at the virtual Jackson Hole conference, explaining the changes in the FOMC's approach. The new statement is rather murky, though that's of course nothing new in the world of fedspeak. Why did the FOMC think these changes were needed, and what will they imply for monetary policy going forward?We'll start with the statement itself. This document originated in 2012,...

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The Bank of Canada Dives Into Unconventional Policy

The Bank of Canada has been doing things that, for it, are unprecedented. And, since our new Bank fo Canada Governor, Tiff Macklem, has made his first policy decision on July 15, now would be a good time to figure out what the Bank of Canada is up to. Since late March, the Bank's target for the overnight policy rate has been at 0.25%, which Macklem referred to in his press conference last week as the "effective lower bound." That's not an effective lower bound in the usual sense, as it's...

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What Sort of Financial Panic Is This?

Well, as you know, things are changing by the day in financial markets, and central banks are moving quickly to keep up. Most central banks have taken aggressive action recently. After a between-meetings policy rate cut of 50 basis points on March 3, the Fed yesterday reduced its target range for the fed funds rate to 0-0.25%. More to the point, the interest rate on the Fed's overnight reverse repo facility is set at 0%, the interest rate on reserves is 0.10%, and the interest rate on...

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Coronavirus and Monetary Policy

On Tuesday, the FOMC voted to reduce the Fed's range for the fed funds rate by 50 basis points, to 1.00-1.25%, and on Wednesday, the Bank of Canada followed suit with a 50 basis point cut in its overnight interest rate target, from 1.75% to 1.25%. As you know, 50 basis point cuts by central banks are aggressive, particularly in the Fed's case where the cut occurred outside a regularly scheduled FOMC meeting. Other central banks might be doing the same - if their policy rates were not already...

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