Monetary Policy Stance Is Tighter than Federal Funds Rate

Jason Choi, Taeyoung Doh, Andrew Foerster and Zinnia Martinez

FRBSF Economic Letter, 2022, vol. 2022, issue 30, 5

Abstract: The Federal Reserve’s use of forward guidance and balance sheet policy means that monetary policy consists of more than changing the federal funds rate target. A proxy federal funds rate that incorporates data from financial markets can help assess the broader stance of monetary policy. This proxy measure shows that, since late 2021, monetary policy has been substantially tighter than the federal funds rate indicates. Tightening financial conditions are similar to what would be expected if the funds rate had exceeded 5¼% by September 2022.

Keywords: monetary policy; federal funds rate; forward guidance; balance sheet (search for similar items in EconPapers)
Date: 2022
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