Central Banks
Fed Study Suggests Policy Much Tighter Than Rates Alone Suggest
- Calculation includes balance-sheet cut plan, forward guidance
- FOMC has raised interest rates by 3.75 percentage points
The Marriner S. Eccles Federal Reserve building in Washington, DC.
Photographer: Stefani Reynolds/BloombergThis article is for subscribers only.
A San Francisco Fed study found that US monetary policy is likely much tighter than interest rates alone suggest, according to an updated calculation of a proxy measure that takes forward guidance and the balance sheet into account.
Financial conditions implied that the Fed’s benchmark policy rate was above 5.25% in September, compared with the actual target range of 3% to 3.25%, according to the analysis published Monday in the San Francisco Fed’s weekly economic letter.