Advanced Search
MyIDEAS: Login

Monetary policy inertia and recent Fed actions

Contents:

Author Info

  • Glenn D. Rudebusch

Abstract

In the latest episode of monetary tightening in the United States, the Federal Open Market Committee (FOMC), which sets U.S. monetary policy, raised the target level of its key policy interest rate, the federal funds rate, from 1% in June 2004 to 5-1/4% in June 2006. This gradual increase was accomplished via a sequence of 17 consecutive 25-basis-point increases at successive FOMC meetings. This slow, steady two-year adjustment of the policy rate can be given two different interpretations. One of these is that the gradual nature of the policy adjustment reflected a slow internal response by the FOMC, which knew where it was going and how fast it wanted to get there and simply took its time in raising the funds rate to the desired level. The other interpretation is that the final level and the speed of adjustment to that level were not known for sure in advance, so the gradual nature of the policy rate adjustment importantly reflected economic developments and data released during the tightening. Based on the research summarized in Rudebusch (2006), this Economic Letter describes these two interpretations and assesses their relative importance in accounting for recent monetary policy actions.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.frbsf.org/publications/economics/letter/2007/el2007-03.html
Download Restriction: no

File URL: http://www.frbsf.org/publications/economics/letter/2007/el2007-03.pdf
Download Restriction: no

Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal FRBSF Economic Letter.

Volume (Year): (2007)
Issue (Month): jan26 ()
Pages:

as in new window
Handle: RePEc:fip:fedfel:y:2007:i:jan26:n:2007-03

Contact details of provider:
Postal: P.O. Box 7702, San Francisco, CA 94120-7702
Phone: (415) 974-2000
Fax: (415) 974-3333
Email:
Web page: http://www.frbsf.org/
More information through EDIRC

Order Information:
Email:

Related research

Keywords: Monetary policy;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Daniel L. Thornton, 2009. "How did we get to inflation targeting and where do we go now? a perspective from the U.S. experience," Working Papers 2009-038, Federal Reserve Bank of St. Louis.
  2. Massimo Guidolin & Daniel L. Thornton, 2010. "Predictions of short-term rates and the expectations hypothesis," Working Papers 2010-013, Federal Reserve Bank of St. Louis.
  3. Charles Goodhart & Wen Bin Lim, 2008. "Interest rate forecasts: a pathology," LSE Research Online Documents on Economics 24431, London School of Economics and Political Science, LSE Library.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedfel:y:2007:i:jan26:n:2007-03. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Rosenberger).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.