2019-08-03 09:28:00 Sat ET
federal reserve monetary policy treasury dollar employment inflation interest rate exchange rate macrofinance recession systemic risk economic growth central bank fomc greenback forward guidance euro capital global financial cycle credit cycle yield curve
U.S. inflation has become sustainably less than the 2% policy target in recent years. As Harvard macro economist Robert Barro indicates, U.S. inflation has remained low and stable since the federal funds rate peaked at 22% in the early-1980s. The Federal Reserve upholds the Taylor interest rate rule that the federal funds rate should increase by more than the next likely rise in inflation. This monetary policy rule accords with the U.S. dual mandate of price stability and maximum sustainable employment. In New Keynesian macroeconomic models, interest rate adjustments can cause real movements in inflation, employment, and the economic output gap due to monopolistic competition and sticky-price persistence.
Former IMF chief economist Olivier Blanchard and his MIT PhD student Jordi Gali show that solo price stabilization would be equivalent to attempting to stabilize both deviations of general prices and economic output gaps from the respective targets. Blanchard and Gali refer to this macroeconomic stabilization principle as the divine coincidence. Nevertheless, the divine coincidence may disappear due to real wage rigidities and financial market frictions. On balance, mainstream macroeconomic models cannot plausibly explain the recent great moderation of low inflation near 1.5%-2% despite gradual and consistent interest rate cycles.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2017-12-13 06:39:00 Wednesday ET

The Federal Communications Commission (FCC) has decided its majority vote to dismantle rules and regulations of most Internet service providers (ISPs) that
2023-07-28 11:28:00 Friday ET

Lucian Bebchuk and Jesse Fried critique that executive pay often cannot help explain the stock return and operational performance of most U.S. public corpor
2018-09-15 11:35:00 Saturday ET

Apple releases its September 2018 trifecta of smart phones or iPhone X sequels: iPhone Xs, iPhone Xs Max, and iPhone XR. Both iPhone Xs and iPhone Xs Max ha
2018-01-12 07:37:00 Friday ET

The Economist delves into the modern perils of tech titans such as Apple, Amazon, Facebook, and Google. These key tech titans often receive plaudits for mak
2025-06-21 05:25:00 Saturday ET

President Trump refreshes American fiscal fears, worries, and concerns through the One Big Beautiful Bill Act. The Congressional Budget Office (CBO) estimat
2026-04-30 08:28:00 Thursday ET

In the current global market for better biotech advances, medical innovations, and healthcare services, the new integration of artificial intelligence (AI)