Tag: "interest rates"

Monetary Policy is Not Interest-Rate Policy

(The FOMC Should Start Making that Distinction)   Monetary policy is not interest-rate policy. Neither is it Fed balance-sheet policy. Monetary policy is money-supply policy. Sometimes these distinctions aren't important, but they are important now, and the Federal Open Market Committee (FOMC) should begin educating the public on them because soon it may need to […]

The Fed’s Box: Quantitative Easing and Rising Long-Term Interest Rates

Once upon a time, people took rising interest rates as evidence of tighter money. Then, circumstances and growing sophistication led to recognition that rising inflation and/or rising inflationary expectations would show up in higher interest rates, especially longer-term rates. Then, apparently, everyone decided that rising long rates could ONLY be explained by easy money and […]

Federal Reserve Purchases of Treasuries, the Yield Curve, and Operation Twist

We get evidence frequently these days of the relative youth of those on financial television, both interviewers and interviewees. Their historical frame of reference doesn't go back very far; so they miss obvious historical precedent for contemporary issues. In my June 10 post, I discussed the Fed's ill-fated attempt to remove excess reserves from the banking system […]

Will low Fed Interest Rates Cause Inflation?

On Tues. I appeared on The Kudlow Report to discuss the prospect of long term inflation. I made the remark that monetary policy is not that easy, and the Fed's main concern should be preventing deflation. I also noted that a weak dollar in the short term could help with economic recovery. On the May 20 Kudlow […]

Credit Card Regulation and Unintended Consequences: Bringing Back old Memories

Yesterday's one-sided Senate vote to increase regulation of credit cards brought back some old mixed memories. My first testimony to a legislative body was to a Committee of the Maryland Legislature in the early 1980s warning them of the likely unintended consequences if they put a limit on credit card interest as they were proposing […]

The Fed Should Coordinate a Rate Cut

The Fed's target Fed funds rate reached 2 percent on April 30, which, given the higher inflation rate this year, is lower in real terms than the 1 percent target rate in 2003. The aggressive Fed easing of the Fed funds and discount rates no doubt helped, compared to not doing it, but it didn't […]