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The Federal Reserve review of its monetary policy framework

Author

Listed:
  • Susana Párraga
  • Pedro del Río
  • Juan Luis Vega

Abstract

This article offers an overview of the monetary policy framework review currently being conducted by the United States Federal Reserve (Fed). First, we examine the alternative strategies under consideration to address the likely greater incidence of episodes in which monetary policy is influenced by the existence of an effective lower bound (ELB) to which the policy rate can fall. We also discuss how the available empirical evidence drawn from the Fed’s own experience makes it likely that it will retain in its toolkit the non-conventional monetary policy instruments adopted in the wake of the global financial crisis to tackle the problem of the greater incidence of the ELB: namely, quantitative easing and forward guidance. Finally, we analyse possible changes in the Fed’s communications policy.

Suggested Citation

  • Susana Párraga & Pedro del Río & Juan Luis Vega, 2019. "The Federal Reserve review of its monetary policy framework," Economic Bulletin, Banco de España, issue DEC.
  • Handle: RePEc:bde:journl:y:2019:i:12:d:aa:n:32
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    More about this item

    Keywords

    monetary policy strategy; quantitative easing; forward guidance; communications policy;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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