Reports

“Finally, we discuss implications of breaks to the Phillips curve for optimal monetary policy. Breaks to the Phillips curve increases uncertainty about parameter values and we find that this has a notable effect on the optimal policy of a central bank policy maker. Specifically, accounting for breaks leads the policy maker to respond less aggressively…

“Our findings suggest that the shelter component of inflation will continue to impart upward pressure (relative to pre-pandemic norms) on 12-month headline and core PCE inflation beyond the end of 2023.”

“The Federal Reserve aggressively tightened monetary policy in 2022, responding to high and persistent inflation. The resulting borrowing cost increase for households and firms was generally anticipated. However, fixed-rate mortgage interest rates were especially sensitive to the policy regime change.” “We find that interest rate volatility and the unique nature of mortgage instruments were important…

“This post updates the findings of our previous work on the relationship between monetary policy, MMF yields, and the size of the MMF industry. During the current tightening cycle, MMF yields have increased by 4.13 percentage points, in line with our previous estimate of the beta on MMF shares between 2002 and 2020; in contrast, deposit rates have…

“Will these twin mandates condemn the world to low growth? No, but they will place the onus for fostering growth back on the pri­vate sector and governments, where it belongs. More focused and less interventionist cen­tral banks would probably deliver better out­comes than the high-inflation, high-leverage, low-growth world we now find ourselves in. For central…

“Despite a year of rapidly rising interest rates, labor markets remain tight, likely contributing to the persistence of inflation. We create industry-specific versions of the KC Fed’s Labor Market Conditions Indicators (LMCI) to examine labor market tightness in different sectors.” “In sum, labor markets in services industries have historically been less sensitive to monetary policy…

February 2023’s Core PCE: 4.6%. “The increase in current-dollar personal income in February was led by an increase in compensation, mainly from wages and salaries. Private wages and salaries for services-producing industries and government wages and salaries increased.” “Within services, increases in housing and health care were partly offset by a decrease in food services…

“The H.4.1 statistical release, “Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks.” “The release presents a balance sheet for each Federal Reserve Bank, a consolidated balance sheet for all 12 Reserve Banks, an associated statement that lists the factors affecting reserve balances of depository institutions, and several other tables…

“We document that banks have started to shift their portfolios away from areas with high climate risk starting after the 2014 UN Climate Summit. This shift is driven by a relative reduction in lending to the borrowers more vulnerable to climate shocks. These findings suggest that banks are concerned about potential losses from more frequent…

“The increase in real GDP primarily reflected increases in private inventory investment, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending that were partly offset by decreases in residential fixed investment and exports. Imports decreased.”