The Federal Reserve's interest rate decisions shape the economic landscape, influencing borrowing costs for everything from mortgages and auto loans to business investments. These policy changes directly affect whether businesses expand operations, invest in equipment, or increase staffing. At Employ America, we research how the Fed can better balance its dual mandate, advocating for approaches that prioritize achieving and sustaining full employment while utilizing more targeted tools to address inflationary pressures.
Monetary Policy
Read the Latest
Read the Latest
55 Posts
Oct 21, 2022
This is the second piece of our vacancies series. In this piece, we refute specific vacancy-backed arguments that the Federal Reserve will need to engineer a recession in order to bring inflation under control.
Just as housing unit completions began to pick up in May, the pipeline of new housing units has already begun to fade. Builders are getting rationally spooked by tighter financial conditions and its real economic implications. While higher mortgage rates reduce the demand for investment (a new housing structure), higher
Tightening global financial conditions may serve to reinforce policy tightening, and the Fed should be cognizant of the risk that hikes may have a stronger-than-expected impact in this period of elevated uncertainty.
Apr 11, 2022
A CPI pre-read, wherein we argue the Fed should be calibrating its tightening efforts to what current conditions are indicating.
Commentators across the ideological spectrum have argued that inequality justifies a more hawkish path for monetary policy. These arguments miss the fact that interest rate policy primarily slows consumer spending and consumer price inflation by slowing down the labor market first.
Conventional wisdom has held that rate hikes slow inflation long enough that straightforward accounts of how exactly one turns into the other are hard to find. Today, everyone needs to be on the same page about how exactly it is that Fed policy in particular can slow inflation.
Feb 01, 2022
We provide an update on what our in-house monetary policy framework suggests about the appropriate trajectory for monetary policy using more reliable “real-time” measures of gross labor income
Critical to the Fed successfully achieving maximum employment over the short run and the longer run is a commitment to, and a communication of, “maximum employment” that is Credible, Broad, and Inclusive.
If the Fed wants to stay true to the "maximum employment" component of its forward guidance, and the "broad and inclusive" nature of that goal, it is imperative that their interest rate policy actions reflect a full recovery on both of these measures.
