Richmond Fed, Report: The Fed, the Stock Market, and the “Greenspan Put’

“Examining the language of FOMC minutes and transcripts, Cieslak and Vissing-Jorgensen found that the Fed pays significant attention to stock market developments. In addition, they found that “discussions of stock market conditions by the FOMC attendees are most frequently cast in the context of consumption, with the consumption-wealth effect highlighted as one of the main channels through which the stock market affects the economy … Their findings are consistent with the view that stock market declines affect monetary policy by reducing policymakers’ growth expectations.”