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Monetary Policy
Monetary Policy
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INFLATION – Market Based Expectations Down Despite Fed Fanfare

Since 2018 the inflation breakeven for the benchmark US Treasury 10-year bond has racheted down after each new Fed policy to raise inflation.  It seems to be doing so again.
 
During the August policy announcement no word was given how greater-than 2% inflation goal would be achieved.  Why not? Because in the technocrat’s mind the problem isn’t central bank competence but the public.  And not in the sense that its populated by mouth-breathing Arizona State University graduates.  No, the problem is the public believes in the omnipotence of the Fed!  
 
As such, the thinking goes, the central bank’s attempts at inflation since 2011 (i.e. forward guidance, inflation targeting, symmetrical inflation, average inflation) have failed because the public does not believe the Fed would ever allow inflation.  No matter what monetary technocrats say, the public is not credibly convinced that the central bank will be irresponsible.  
 
Thus the August fanfare that the Fed was ‘ready to get nuts’. 
 

We Don't Believe You Fed
We Don't Believe You Fed

BoE negative interest rates

Slowly but surely

History of central banks

Does anyone have a good resource they can share on how central banks are supposed to work? I’m a juniorburger when it comes to finance and investing but all the crypto stuff has got me really interested in the history/purpose of money. I’d be interested to know what problem central banks were created to solve and how their remit has slowly crept over the years. I guess the zeitgeist is to bash central banks but I would have thought they were initially set up with an altruistic (if utopian purpose). I have read the bitcoin standard and the ascent of money, any good historians on central banks?

Lyn AldenExchange Expert
Founder of Lyn Alden Investment Strategy

I don't know why they discontinued it, but they did change excess reserve requirements in response to the pandemic. 

As George pointed out, FRED still has total reserves. I also recommend monitoring bank reserves/cash as a % of bank assets or % of bank deposits.