monetary policy and central banks
Educational articles in this subcategory.
Glossary: Monetary Policy Terms
This glossary defines the essential terms you'll encounter when following Federal Reserve communications and monetary policy developments. Terms are a...
Monitoring Fed-Speak and Meeting Minutes
**The phrase "a few participants" in September 2023 FOMC minutes signaled emerging support for rate cuts—three months before the December dot plot con...
Policy Mistakes and Historical Lessons
**The Fed's 2021-2022 "transitory" inflation misjudgment forced the most aggressive hiking cycle since 1980, crushing both bonds and stocks simultaneo...
Monetary Policy Transmission to Credit Markets
**When the Fed hiked rates by 525 basis points between 2022 and 2023, high-yield credit spreads widened from 310 bps to 600 bps, and bank lending stan...
Impact of Policy on the US Dollar
**The 2022 Fed hiking cycle drove the U.S. Dollar Index from 95 to 114—a 20% appreciation in nine months.** That move crushed international equity ret...
Understanding SEP and Economic Projections
**The Fed's dot plot moved markets by over $1 trillion in a single afternoon.** In December 2023, the median dot shifted from projecting **50 bps** of...
Measuring Market-Implied Policy Expectations
**Fed funds futures accurately predicted the direction of 47 of the last 50 rate decisions—but the magnitude and timing of changes often surprised mar...
Federal Reserve Bank Structure and Voting Rotation
**The Federal Reserve isn't a single institution—it's a system of 12 regional banks plus a central Board of Governors.** Only 12 people vote on each i...
Global Central Bank Coordination
**When global dollar funding markets seized in March 2020, the Federal Reserve extended $450 billion in swap lines to foreign central banks within thr...
How Policy Moves Impact Yield Curves
**When the Fed hikes rates, short-term Treasury yields respond directly—but long-term yields often lag or move less.** This asymmetry creates the curv...
Emergency Lending Powers: Section 13(3)
**The Fed deployed $2.3 trillion in emergency lending capacity within weeks of the COVID-19 shock.** That speed—and the scale—reflected lessons learne...
Standing Overnight Repo and Reverse Repo Facilities
**ON RRP usage peaked at $2.55 trillion in December 2022—absorbing excess cash that otherwise would have pushed short-term rates below the Fed's targe...
Role of the Discount Window
**During the March 2023 banking stress, discount window borrowing surged from near zero to $152.9 billion in a single week.** That spike—the largest s...
Federal Reserve Communication Strategy
**A single word change in a Fed statement can move trillions of dollars.** When the January 2019 statement replaced "some further gradual increases" w...
Forward Guidance and Dot Plots
**The dot plot shifted expectations for 2024 rate cuts from six to three in a single March meeting.** That revision triggered a **40+ basis point** mo...
Balance Sheet Normalization Roadmaps
After expanding its balance sheet to **$9 trillion** during the pandemic, the Federal Reserve is working to shrink it back to a sustainable level. Thi...
Quantitative Easing vs. Tightening
When interest rates hit zero, the Fed cannot cut further using conventional tools. **Quantitative easing (QE)**—large-scale asset purchases—became the...
Open Market Operations and Repo Facilities
The FOMC announces a target range for the federal funds rate, but the market determines the actual rate. To keep the effective fed funds rate (EFFR) w...
How the FOMC Sets the Fed Funds Target
Eight times per year, 12 individuals gather in Washington to set the benchmark interest rate that influences everything from mortgage rates to stock v...
Federal Reserve Dual Mandate Explained
The Federal Reserve operates under a dual mandate from Congress: **maximum employment** and **price stability**. These two objectives drive every inte...