Traditionally, ETFs have been designed to track indices and so were managed passively. However, in 2008, the Securities Exchange Commission (or SEC) allowed ETFs to operate as actively managed funds.
In this part of the series, we’ll discuss Mester’s views on the second research question posed to the audience: how should monetary policy makers incorporate revisions to PCE inflation into their policymaking framework?
This series is our attempt to educate our readers about leveraged and inverse ETFs, their structure, and their suitability for retail investors.
Fostering price stability is one of the Fed’s most important goals. Stable prices promote confidence in the debt (LQD) markets as well as in the operating environment for businesses
In this part of the series, we’ll discuss Mester’s views on how monetary policy decisions impact the Fed’s dual mandate of ensuring price stability.
Loretta Mester is the new president and chief executive officer of the Federal Reserve Bank of Cleveland. She has taken over the reins from Sandra Pianalto, who retired on May 31.
Even among those who have jobs, the fraction of people working part-time but who would like to work more hours is higher than the historical average.
In March 2007, the unemployment rate was 4.4%. It rose slowly through 2007 to reach 5% at the end of 2007, when, according to National Bureau of Economic Research, the Great Recession started.
Since the FOMC’s announcement of a 2% inflation target in January 2012, inflation has averaged about 1.3% a year—far below the target.
Growth in GDP translates to healthier corporate profits, which in turn represent a spur in demand for product and services. This may lead to a rise in inflation.
In monetary policy parlance, a “dove” generally tends to focus more on higher employment, while the “hawks” are more concerned with the central bank’s inflation targets.
Another drawback of low inflation is that it signals a significant problem in the economy. Prices show how the economy is using its available resources.
Various Fed officials, including Fed Chair Janet Yellen, have expressed their preference to fill in one of the board vacancies with a community banker.
The FOMC has interpreted the price stability objective as keeping the inflation close to 2%. However, since the start of the Great Recession, the personal consumption expenditure (or PCE) inflation rate has averaged just 1.5% a year.
Dr. Narayana Kocherlakota started his speech by explaining the Fed and the FOMC’s structure. He claimed that the Fed is a unique institution compared to other central banks around the world.
The Fed has three major monetary policy tools: the discount rate, reserve requirement, and open market operations. The first two come under the purview of the Board of Governors, while the FOMC decides on open market operations.
Dr. Narayana Kocherlakota delivered a speech at the Economic Club of Minnesota on May 21, which he framed as a report about how the FOMC is doing in terms of achieving its key macroeconomic goals.
The views of new members on the Board of Governors and the Federal Open Market Committee (or FOMC) will be critical to both fixed income (BND) and equity (SPY) markets.
The Conference Board’s Consumer Confidence Index release for May was released on May 27. The headline Index, measuring consumer sentiment, rose to 83 in May from 81.7 in April.
Manufacturing growth appears to be steady in the Fifth District. Although new orders declined sharply month-on-month, firms remained upbeat for business prospects.