Money Supply: Farewell to Narayana Kocherlakota

Narayana Kocherlakota, president of the Minneapolis Fed, today announced he will step down in 2016.

“Earlier this week, I informed the board of directors of the Federal Reserve Bank of Minneapolis that I do not intend to seek reappointment to a new term as president of the Bank after my current term ends on February 29, 2016,” Kocherlakota said. “I became president of the Minneapolis Bank in October 2009 so that I could be of service to my country in an economic emergency.

I have been honored to play a role in shaping the response to that dire situation. While challenges lie ahead for the Federal Reserve System, the state of crisis has passed, and I have decided not to continue my service into a new term.”

It is rather early to announce a 2016 departure but Mr Kocherlakota had made his decision. “I think once he had made up his mind and informed the board we thought it was good governance to announce it,” said Randall Hogan, chairman of the Minneapolis Fed board. Mr Hogan said the board is not launching an immediate search process, implying Mr Kocherlakota will indeed serve out his term, which runs until February 2016. Read more

Money Supply – Dudley, the Fed & financial markets

Could unexpectedly low levels of Treasury yields, pushed down by monetary policy in Europe and Japan, lead the Fed to raise interest rates earlier and faster than it otherwise would? That’s the prospect raised by an intriguing and important speech today by New York Fed president William Dudley. He makes dovish arguments about when rates should lift off, but forecasts they actually will rise by mid-2015, in line with consensus. He then breaks new ground by suggesting the pace of rate rises will depend on how financial markets respond to them.

(1) Dudley is dovish… Read more

Money Supply: A “considerable” challenge

Since I wrote about the Fed debate ten days ago, the market consensus has moved rapidly towards a change in the Fed’s “considerable time” language this Wednesday. I was cautious about the timing, however, because this is not straightforward – coming up with new language is quite a challenge.

This is a (very long) attempt to think through the Fed’s options. The bottom line is that “considerable time” may survive in some form on Wednesday, but if so, I’ll be surprised if there is not a significant change to the statement that sets up its eventual departure. Read more

The Legend of Jackson Hole

It is probably the highest profile event on the Fed calendar: the chair’s opening speech at the Kansas City Fed’s symposium in Jackson Hole, Wyoming. The setting is spectacular; the audience runs the world’s central banks. Markets go on high alert for new guidance on policy. To add to the sense of occasion this year, it will be Janet Yellen’s first visit as Fed chair.

The oddity is that Jackson Hole’s reputation as a market mover is largely accidental. It is not an obvious venue for the Fed to communicate policy: what, in fact, could seem more out-of-touch than proclaiming the nation’s economic path from a gorgeous mountain resort in one of the richest zip codes in the USA? It is most likely, therefore, that Yellen’s speech on Labour Markets (the title has been announced) will contain a lot of important analysis but much less red meat on policy. Read more

Money Supply: White House on Labour Participation

The White House has joined the debate about declining labour force participation with an excellent report from the Council of Economic Advisers. (The fingerprints of Harvard’s James Stock are in evidence in some punctilious time-series econometrics.)

The CEA reaches similar conclusions to a number of other studies. Most of the decline in labour force participation was demographic, due to an aging population; a modest proportion was due to the recession and its unusual severity. Read more

Money Supply: Fischer worries about macroprudential policy

Note: FT Alphaville is now playing host to posts from the FT’s Money Supply box. Enjoy (and argue away, if you see fit). Here’s Robin Harding, the FT’s US economics editor…

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The Fed’s riposte on short v long-term unemployment

Cross-posted from Money Supply

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