US interest rates
In this guest post, Bill Nelson, formerly a deputy director of the Federal Reserve Board’s Division of Monetary Affairs and the current chief economist of The Clearing House, explains how the open-ended asset purchase programme caused Fed officials to rethink their approach to managing the balance sheet.
Thursday December 14 will go down in history as the day that the Walt Disney Company wrote a new chapter in the history of a once feared empire, and settled the destiny of one who was taught to wield mysterious power by a wise and wizened old master. But enough of Star Wars, Luke Skywalker and his mentor Yoda, writes Matthew Vincent. In other news, Disney is buying the entertainment assets of the 21st Century Fox empire, and deciding the destiny of James Murdoch, who had run the business for his father: the legendary media mogul Rupert.
How are central banks expected to function if the world’s smartest economists and policymakers can’t even agree on the basics?
The Fed was suppressing volatility by absorbing convexity risk. Soon it won’t be.
Back in November 2013, nearing the end of his term as Fed chair, Ben Bernanke offered perhaps the clearest articulation of his views on the mechanisms through which the Fed’s distinct policies affect monetary conditions. My colleague Gavyn Davies then described the critical element in Bernanke’s speech as the separation principle, writing:
Just more than three years ago, Janet Yellen gave the Michel Camdessus lecture at the IMF, titled Monetary Policy and Financial Stability. The thrust of the speech was that “monetary policy faces significant limitations as a tool to promote financial stability”. As Yellen summarised the point then: