What Increasing the Federal Funds Rate Means for the Stock Market

Since the Great Recession rocked the U.S. and world economy in 2007, the federal funds rate in the U.S. has been at or near zero, falling from its pre-recession level of 5.25%. The hallmark of post-recession years has been the Fed’s strict adherence to low interest rates for fear that raising them could send the United States back into a recession. But now, this period may finally be coming to an end. For the first time in nine years interest rates may be set to climb as Janet Yellen announced at the Fed’s annual Jackson Hole meeting two weeks ago Continue reading What Increasing the Federal Funds Rate Means for the Stock Market

Anecdotes at the Federal Reserve

The Federal Reserve occupies a special pedestal of authority and competence in the arena of governmental bodies charged with economic policy. Compared to Congress, it acts with amazing unity and speed. Moreover, compared to Congresses’s shortsighted and often political settlements, the Federal Reserve tends to make calculated, strategic decisions with an close eye to their long-term ramifications.The tendency of investors and analysts to hang on very last word of the Chairman’s public statements evidences the delicately crafted nature of its policy. However, in moments of crisis, even the ordered, empirical world of the Fed policy-making can be turned upside down. Transcripts of Federal Open Market Committee Continue reading Anecdotes at the Federal Reserve

Diversity of Economic Indicators

Economists—as well as politicians, traders, and the media—use indicators to assess and describe the economy. They’re like measurements your doctor might take to evaluate your health: heart rate, blood pressure, reflexes, etc.. Economic indicators range from straightforward, official measurements of intuitively “economic” statistics (such as the BLS’s Consumer Price Index) to unofficial, indirect methods of gauging economic activity. In our healthcare analogy, indirect indicators might be like your doctor trying to determine your overall health by investigating how well-used your pillow is (to guess the quality of your sleep). Think that sounds clever? Check out these economic indicators: + using “Craigslist Continue reading Diversity of Economic Indicators

Fed Chair Zero Bound

Janet Yellen—recently nominated to be the next Chairperson the Federal Reserve—is certainly breaking new ground. If her nomination is confirmed by the senate, she will be the first woman to lead the institution in its history. Her likely rise is especially significant in the field of central banking. According to CNN,12 of the world’s 160 central banks, only about 6%, had female governors last year. But although her gender shatters the historical norm of Fed chairs, she also carries on a curious pattern in that office—through her stature. It seems that our head central bankers keep getting smaller and smaller. Paul Continue reading Fed Chair Zero Bound