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2024
Drivers of Option-Implied Interest Rate Volatility
Option-implied volatilities of U.S. short-term interest rates have risen sharply since late 2021, reaching their highest levels in over a decade. Although these measures declined moderately since early 2023, they remain at around the 70th percentile of their historical distribution. This note links the implied volatility of short-term interest rates to macroeconomic uncertainty and highlights two fundamental drivers of short-term interest rate volatility over the past 30 years: inflation uncertainty and growth uncertainty.
DOI: https://doi.org/10.17016/2380-7172.3572
Assessment of Dealer Capacity to Intermediate in Treasury and Agency MBS Markets
We provide an assessment of broker-dealers’ current and future capacity to support the smooth functioning of the Treasury and agency MBS markets, considering increases in Treasury issuance and continued Federal Reserve balance sheet normalization. Drawing on regulatory data analysis, recent research, and experiences with fixed income market functioning, we focus on two types of constraints that are most relevant for dealers’ intermediation activities: regulatory constraints—specifically the minimum Supplementary Leverage Ratio (SLR) requirement at the Bank Holding Company (BHC) level—and internal risk limits—specifically Value at Risk (VaR) limits at the trading-desk level for each dealer.
DOI: https://doi.org/10.17016/2380-7172.3610
A Better Way of Understanding the US Consumer: Decomposing Retail Spending by Household Income
Changes in retail spending reflect changes in consumer demand for goods. For the past several months, retail sales estimates published by the Census Bureau have indicated that consumer demand for retail goods remains resilient. However, published measures do not provide details on which consumers’ spending has remained resilient. Using a detailed micro dataset, we construct a measure of average retail spending for low-, middle- and high-income households.
DOI: https://doi.org/10.17016/2380-7172.3611
Rising Auto Loan Delinquencies and High Monthly Payments
Delinquency rates on auto loans rose substantially to above pre-pandemic levels by the end of 2023, after falling to historical lows during the COVID-19 pandemic. Because auto loans are an important sector in consumer credit, accounting for about 25 percent of nonmortgage consumer credit, a deeper analysis of the increase in delinquencies can give insights into the financial health of borrowers in consumer credit markets and overall household financial well-being.
DOI: https://doi.org/10.17016/2380-7172.3623
Dealer Balance Sheet Constraints Evidence from Dealer-Level Data across Repo Market Segments
The continued growth of U.S. Treasury issuance has garnered interest in understanding dealers’ ability to intermediate the U.S. Treasury market. These trends have spurred various efforts to measure the degree to which dealer balance sheet constraints—broadly defined as restrictions on the overall size of an intermediary’s balance sheet—can affect the intermediation of the Treasury market.
DOI: https://doi.org/10.17016/2380-7172.3598
The Evolution of the Federal Reserve's Agency MBS Holdings
The Federal Reserve (Fed) utilized its balance sheet as a monetary policy tool in response to the Global Financial Crisis (GFC) and the COVID-19 pandemic, acquiring large quantities of Treasury and agency securities. In 2022, the Fed began to reduce the size of its securities portfolio held in the System Open Market Account (SOMA) by allowing securities to roll off its balance sheet in amounts up to specific monthly redemption caps for Treasury securities and agency securities.
DOI: https://doi.org/10.17016/2380-7172.3612
Financial Conditions and Risks to the Economic Outlook
Financial conditions have swung considerably over the past two and half years. They moved from very accommodative levels in late 2021 to providing a significant drag on economic activity in 2022 and 2023. Since early this year, they eased moderately amid monetary policy communications signaling that the federal funds rate had likely reached its peak for this monetary policy tightening cycle.
DOI: https://doi.org/10.17016/2380-7172.3599
Introducing a Credit Bureau-Based Measure of U.S. Household Debt Service
Each quarter, the Board publishes an estimate of the ratio of aggregate required household debt service payments to income. The numerator of this Debt Service Ratio (DSR) is calculated using estimates of the outstanding balances of household debts in various product categories, their average interest rates, and times until maturity.
DOI: https://doi.org/10.17016/2380-7172.3615
Nonlinear Phillips Curves
The slope of the Phillips curve flattened around the turn of the century. The slope, however, is also kinked (nonlinear) such that it is steeper in a tight labor market than in a more normal one. The magnitude of this kink means that the flattening of the Phillips curve around the turn of the century has not changed much the slope in a tight labor market. This holds for both price and wage Phillips curves and for both the United States (US) and the European Union (EU). Our findings are relevant to policy debates about the costs and benefits of a running a hot labor market. Monetary policy-makers face a fundamentally different inflation-unemployment tradeoff in tight labor markets compared with looser labor markets and should consider this when setting policy.
DOI: https://doi.org/10.17016/2380-7172.3596
The Treasury Tantrum of 2023
In the second half of last year, the 10-year Treasury yield skyrocketed from below 4 percent to above 5 percent, and then back down to 3.9 percent (Figure 1). On the way up, market commentary cited several key drivers for the rapid increase, including strong employment and inflation data, unexpectedly high Treasury issuance, and FOMC communications indicating that rates may need to be higher for longer.
DOI: https://doi.org/10.17016/2380-7172.3500
Convenience Yield as a Driver of r*
The natural rate of interest, or r*, corresponds to the short-term real interest rate that is consistent with full employment and price stability, after all temporary shocks have abated. The most popular framework to estimate r* is Laubach and Williams (2003) and Holston, Laubach, and Williams (2017, 2023) (henceforth HLW).
DOI: https://doi.org/10.17016/2380-7172.3575
Internationalization of the Chinese renminbi: progress and outlook
The international role of the Chinese renminbi has received increased attention recently as Chinese authorities push for increased international usage of the renminbi and Western sanctions on Russia potentially increase renminbi attractiveness. Some newspaper article headlines even imply that the renminbi is about to rival the U.S. dollar as the world's dominant international currency.
DOI: https://doi.org/10.17016/2380-7172.3592
The interaction of bank leverage, interest rate risk, and runnable funding
Silicon Valley Bank (SVB), Signature Bank, First Republic Bank (FRC) had too little useable liquidity relative to their runnable funding and too little capital given the magnitude of their interest rate risk. The mismanagement of these vulnerabilities ultimately contributed to a loss of confidence in their business models.
DOI: https://doi.org/10.17016/2380-7172.3605
Monetary Policy in Uncertain Times
We investigate the effect of uncertainty surrounding the slope of the Phillips curve on optimal monetary policy. To do this, we first account for parameter uncertainty in a time-invariant Bayesian Phillips curve model. Second, we generalize this model to allow for instabilities in the form of breaks. In both the United States (US) and the European Union (EU), we identify a break around the turn of the century, after which the Phillips curve flattened. Finally, we show how breaks amplify uncertainty in the Phillips curve model, significantly impacting optimal monetary policy. Accounting for breaks causes policymakers to respond more cautiously to deviations in the unemployment rate from its natural rate – as they are less certain about the impact of economic slack on inflation – but to compensate for this increased caution by responding more aggressively to deviations of inflation from its target. Our estimates provide a lower bound for the magnitude of the impact of breaks on the change in responsiveness of optimal monetary policy since they are based on the full sample of data, while policymakers face additional uncertainty as they must continuously determine in real time whether a break has occurred.
DOI: https://doi.org/10.17016/2380-7172.3603
Offline Payments: Implications for Reliability and Resiliency in Digital Payment Systems
With the proliferation of digital payments, internet-based technology has been integral in supporting the delivery of these transactions. Traditional digital payments, such as those made with credit cards, debit cards, and mobile wallets, often require an internet connection to settle transactions. Processors must communicate between banks to carry out a payment, relying on internet connectivity to do so.
DOI: https://doi.org/10.17016/2380-7172.3456
Third Conference on the International Roles of the U.S. Dollar
On May 20 and 21, 2024, the Federal Reserve Board and the Federal Reserve Bank of New York jointly hosted the Third Annual International Roles of the U.S. Dollar Conference. The conference brought together researchers, practitioners, and policymakers to understand how changes in the global economic and financial landscape may affect the central role of the dollar.
DOI: https://doi.org/10.17016/2380-7172.3587
Disinflation Progress: A Comparison of Advanced Economies
Following several decades of low inflation in most advanced economies, the Covid pandemic gave rise to unprecedented global economic conditions, materializing in a synchronized surge in price pressures. In this note, we analyze the recent inflation burst and assess the disinflation progress across advanced economies.
DOI: https://doi.org/10.17016/2380-7172.3576
As the U.S. is Derisking from China, Other Foreign U.S. Suppliers Are Relying More on Chinese Imports
China's share of U.S. goods imports has fallen significantly since 2017 following the U.S.-China tariff hikes and other geopolitical tensions. Even though the U.S. has reduced its direct sourcing from China, other foreign suppliers of U.S. imported goods have increased their reliance on imports from China.
DOI: https://doi.org/10.17016/2380-7172.3498
Oil Price Shocks and Inflation in a DSGE Model of the Global Economy
The 2022 inflation surge has renewed interest in the drivers of inflation, with special attention on the role of oil and other commodity prices given the large increase in these prices post-pandemic. In this note, we use a DSGE model of the global economy to quantify the impact on U.S. inflation and output of the oil shocks that drove oil prices up by about $45 per barrel in the first half of 2022, around Russia's invasion of Ukraine.
DOI: https://doi.org/10.17016/2380-7172.3570
Estimating Securities-Based Loans Outstanding
Securities-based loans are loans for personal use that are backed by the borrowers' investment portfolios. The key benefit provided by such loans is the ability for borrowers to obtain access to funding without having to liquidate their portfolios.
DOI: https://doi.org/10.17016/2380-7172.3591
Private Credit Growth and Monetary Policy Transmission
In this note, we examine the recent growth of private credit markets and its effects on monetary policy transmission. We find that private credit has grown by competing with or substituting other forms of credit and by lending to a set of borrowers that have difficulty obtaining credit otherwise.
DOI: https://doi.org/10.17016/2380-7172.3565
Evaluating Forecast Performance of Market-based Measures of Inflation Expectations in Europe
Predictions of future inflation rates shed light on the path of the economy and inform central banks’ policy rate decisions. Two commonly used sources of inflation forecasts are surveys and market-based inflation expectations. Survey-based inflation expectations, such as those from the Survey of Professional Forecasters, are derived by eliciting responses from a group of respondents about their beliefs.
DOI: https://doi.org/10.17016/2380-7172.3550
Has the Inflation Process Become More Persistent? Evidence from the Major Advanced Economies
The sustained surge in inflation around the world following the pandemic has raised the possibility that the inflation process has become more persistent. Such a rise in persistence could result from firms and households putting greater weight on past inflation outcomes in their price- and wage-setting decisions than they did in the recent past, say, because they have less conviction that inflation will return promptly to target.
DOI: https://doi.org/10.17016/2380-7172.3562
Global Implications of Brighter U.S. Productivity Prospects
Investment related to artificial intelligence (AI) is booming in the U.S. compared to other countries, as shown in figure 1. Moreover, new business registrations have surged in the U.S. since the pandemic, unlike in the euro area where new business registrations remained flat (de Soyres et al. 2024).
DOI: https://doi.org/10.17016/2380-7172.3559
Small-Dollar Loans in the U.S.: Evidence from Credit Bureau Data
Small-dollar loans were brought into the spotlight in March 2020, when five agencies—the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC)—issued a joint statement encouraging their supervised financial institutions to offer such loans to consumers and small businesses in response to the onset of the pandemic.
DOI: https://doi.org/10.17016/2380-7172.3571
Central Clearing Counterparties in the Financial Accounts of the United States
The March 7, 2024, release of the Z.1 Financial Accounts of the United States (the Accounts) introduced a new supplementary table, Central Clearing Counterparties (table L.132.c), which separately reports financial assets and liabilities of central clearing counterparties (CCPs). CCPs in the Accounts are financial intermediaries that support the functioning of financial markets by taking on counterparty credit risk and providing clearing and settlement of securities and derivatives.
DOI: https://doi.org/10.17016/2380-7172.3540
The Recent Evolution of the Federal Funds Market and its Dynamics during Reductions of the Federal Reserve's Balance Sheet
Following its May 2024 meeting, the Federal Open Market Committee (FOMC) announced that it would slow the pace of its balance sheet reduction starting in June 2024. This will allow for a more gradual transition from an abundant to ample supply of reserves. As reserves decline, conditions in money markets, including the federal (fed) funds market, will be important in judging whether the supply of reserves is approaching ample.
DOI: https://doi.org/10.17016/2380-7172.3548
Lessons from the Co-movement of Inflation around the World
The aftermath of the COVID-19 pandemic saw a surge in inflation around the world, reflecting rapid increases in the demand for goods, strained supply chains, tight labor markets, and sharp hikes in commodity prices exacerbated by the Russian war on Ukraine. As illustrated in figure 1, this inflation surge was synchronized across advanced and emerging economies, not only for total inflation but also for its core component.
DOI: https://doi.org/10.17016/2380-7172.3543
Estimating Retail Credit in the U.S.
In this note, we estimate the size of an understudied segment of the consumer credit market—retail credit. Retail credit consists of the amounts owed to retail stores by their customers for purchases made on credit extended in partnership with a financial institution. Although retail credit is included in the consumer credit totals in Federal Reserve Statistical Release G.19, "Consumer Credit," a principal economic indicator providing the official estimate for consumer credit holdings in the U.S., it is not separately categorized on the release.
DOI: https://doi.org/10.17016/2380-7172.3535
Who Buys Treasuries When the Fed Reduces its Holdings
The Federal Reserve began to decrease the size of its balance sheet in June 2022, entering a phase of "balance sheet reduction" that continues today. In this note, we determine which sectors absorbed the resulting increased supply of Treasury coupon securities. We find that, during the first balance sheet reduction period between 2017 and 2019, dealers, households, and hedge funds bought significantly more Treasury coupons. However, during the post-pandemic balance sheet reduction period, it appears that dealers, private insurance, and the rest of the world purchased the Treasury coupon securities from the reduction in Federal Reserve purchases, not hedge funds.
DOI: https://doi.org/10.17016/2380-7172.3512
Mitigating Too Big to Fail
Financial institutions that are "Too-Big-to-Fail" impede proper market functioning in financial services. These firms can undermine the disciplining effects of capital markets should their failure have substantial "knock-on" effects on the real economy.
DOI: https://doi.org/10.17016/2380-7172.3521
A Note On Revolving Credit Estimates
Revolving credit represents a notable share of consumer debt and is an important part of house- hold balance sheets. At the end of 2023, revolving credit was measured at over $1.3 trillion in the Z.1 Statistical Release, "Financial Accounts of the United States," and accounted for more than 25 per- cent of total consumer credit.
DOI: https://doi.org/10.17016/2380-7172.3526
Rural Employment Disparities by Race, Ethnicity, and Region
This FEDS Note explores racial and regional differences in metro-nonmetro employment disparities by looking at employment rates by age, sex, race and ethnicity, and region. It finds substantial differences in the metro-nonmetro employment gap across racial and ethnic groups, with Black or African American and American Indian and Alaska Native men and women having much lower employment rates in nonmetro areas relative to their metro peers.
DOI: https://doi.org/10.17016/2380-7172.3510
Lessons from Past Monetary Easing Cycles
Many central banks are at a critical juncture in their current monetary policy cycles as they assess whether it would be appropriate to embark on an easing phase following one of the most aggressive episodes of monetary tightening in recent history. In this note, we highlight key aspects of past monetary policy easing episodes in selected advanced economies and what lessons we may learn from these past experiences.
DOI: https://doi.org/10.17016/2380-7172.3504
Unpacking the Effects of Bank Credit Supply Shocks on Economic Activity
In this note, we examine the effects of bank credit supply shocks on real economic activity. First, we estimate how GDP and various aggregate demand sectors respond to such shocks. Second, based on the estimated responses, we compute how much those sectors contribute to the overall response of aggregate demand to bank credit supply shocks.
DOI: https://doi.org/10.17016/2380-7172.3517
Measuring Bank Credit Supply Shocks Using the Senior Loan Officer Survey
Estimating the effects that bank credit supply has on macroeconomic activity has long been an area of active research. A key challenge in pursuing this goal is the ability to measure such shocks to banks' supply of credit separately from shocks to borrowers' demand for credit.
DOI: https://doi.org/10.17016/2380-7172.3516
Why is the U.S. GDP recovering faster than other advanced economies?
Economic performance since the onset of the COVID-19 pandemic has been very heterogenous across countries. While real GDP in the U.S. has already returned to its pre-pandemic trend, advanced foreign economies (AFEs) experienced a much weaker recovery, both relative to the U.S. and to their own pre-pandemic trend.
DOI: https://doi.org/10.17016/2380-7172.3495
Monetary Policy and Exchange Rates during the Global Tightening
Most central banks tightened monetary policy considerably over the past few years as inflation surged globally. Though effects of the COVID pandemic on global supply chains and labor markets was a common factor driving inflation higher across economies, domestic factors led to notable variation in the timing and extent of monetary policy responses.
DOI: https://doi.org/10.17016/2380-7172.3489
Why Do Mutual Funds Invest in Treasury Futures?
Asset managers’ net long positions in Treasury futures have reached their historical highs in recent months, driven in part by mutual funds’ demand for short- and medium-term Treasury futures. Analyzing mutual fund portfolio holdings reports on SEC Form N-PORT, we find that the increase in mutual funds’ futures holdings since 2020 can be attributed to both increased demand for Treasury exposures during a higher interest rate environment and mutual funds’ preference for sourcing these exposures through futures rather than securities.
DOI: https://doi.org/10.17016/2380-7172.3488
Stress Testing the Corporate Debt Servicing Capacity: A Scenario Analysis
The total volume of outstanding debt issued by U.S. nonfinancial firms relative to GDP has increased by about 8 percentage points in the past decade. While a growing volume of debt was largely viewed as benign in the low interest rate environment of the 2010s, the rapid increase in both short- and long-term rates since early 2022 has raised concerns about the debt-servicing capacity of the corporate sector.
DOI: https://doi.org/10.17016/2380-7172.3481
Estimating the importance of monetary policy shocks for variation in the U.S. homeownership rate
Being a homeowner is one of the tenets of the American dream. In general, relative to renting, people see homeownership as a path to wealth through the usual appreciation of the house prices and the forced savings through mortgage payments but also a path to financial stability through more stable and predictable housing costs (Young et al., 2023).
DOI: https://doi.org/10.17016/2380-7172.3457
Firms' financing choice between short-term and long-term debts: Are they substitutes?
When selecting debt to finance their operations and investments, companies face crucial decisions regarding the appropriate types of debt. Despite the classic Modigliani–Miller (1958) capital structure irrelevance result, real-world market frictions can significantly impact a firm's capital structure decisions. This reality means that one debt type is not a perfect substitute for another, due to differences in important factors including maturity structures, funding purposes, rollover risks, and funding costs.
DOI: https://doi.org/10.17016/2380-7172.3438
Inequality and financial sector vulnerabilities
In recent decades, income and wealth inequality have risen notably in the United States and other countries around the world. Importantly, such rises in inequality have been shown to predict financial crises.
DOI: https://doi.org/10.17016/2380-7172.3482
High tech business entry in the pandemic era
The COVID-19 pandemic and its aftermath have featured a surge in business entry (Decker and Haltiwanger 2024). A natural question is whether the elevated entry seen in recent years will have positive implications for aggregate productivity growth given the historically important role of business entry for productivity dynamics (Decker et al. 2014, Alon et al. 2018).
DOI: https://doi.org/10.17016/2380-7172.3499
Introducing New Valuation Change Data for U.S. Cross-Border Portfolio Holdings
The most comprehensive data on cross-border capital holdings for the United States come from the Treasury International Capital (TIC) System. These data inform the official U.S. balance of payments statistics and are crucial for understanding U.S. capital flows, their causes, and their effects on the U.S. economy.
DOI: https://doi.org/10.17016/2380-7172.3493
Tapping the Brakes: The Effect of the 2023 United Auto Workers Strike on Economic Activity
The United Auto Workers (UAW) union tapped the brakes and called for a strike against all Detroit Three automakers—General Motors (GM), Ford, and Stellantis—on September 15, 2023, after having failed to reach an agreement with the automakers on a new four-year contract. The strike lasted for about six weeks and was the first strike in history targeting all Detroit Three automakers.
DOI: https://doi.org/10.17016/2380-7172.3477
Global trade patterns in the wake of the 2018-2019 U.S.-China tariff hikes
In 2018, the U.S. government announced bilateral tariff increases on a number of Chinese goods. Thus began a tit-for-tat exchange of increasing bilateral tariffs between the U.S. and China until, by the end of 2019, most of the goods traded between the U.S. and China were subject to additional tariffs. In this note, we use Census and UN Comtrade data to study the effects of the 2018-19 U.S.-China tariff hikes on global trade patterns.
DOI: https://doi.org/10.17016/2380-7172.3464
Is This Time Different: How Are Banks Performing during the Recent Interest Rate Increases Compared to 2004-2006?
In 2022, the Federal Reserve began its latest monetary tightening cycle. Increases in interest rates are generally favorable for commercial bank net interest income (interest income minus interest expense). This relationship holds because many loan types have adjustable rates, and banks do not pass through all interest rate increases to depositors.
DOI: https://doi.org/10.17016/2380-7172.3466
Tokenized Assets on Public Blockchains: How Transparent is the Blockchain?
With the proliferation of programmable blockchains with smart contract capabilities, new blockchain technology use cases have emerged that involve the tokenization of conventional financial assets and related smart contract-based financial services. While early blockchains like Bitcoin introduced native cryptocurrencies as new asset classes, in recent years, market participants have noted the potential for blockchain and distributed ledger technologies (DLT) to be used to trade tokenized versions of bonds, money funds, and commodities, among other assets (GFMA, 2023, p. 6).
DOI: https://doi.org/10.17016/2380-7172.3444
Quantifying Treasury Cash-Futures Basis Trades
The Treasury cash-futures basis trade exploits the difference in prices between a Treasury security and a related Treasury futures contract – the so-called cash-futures basis – by purchasing the asset that is relatively undervalued and selling the other in a bet that the prices will converge. Basis traders support Treasury market functioning by keeping the prices of Treasury futures near their fair value relative to Treasury securities and by serving as an important source of demand for Treasury securities, including during the 2017-2019 period of quantitative tightening when basis traders absorbed much of the increased Treasury supply.
DOI: https://doi.org/10.17016/2380-7172.3458
Rising Markups and Declining Business Dynamism: Evidence From the Industry Cross Section
In recent decades, various measures of “business dynamism”—such as new business entry rates and gross job or worker flows—have seen significant declines in the U.S.. Over a similar time frame, there is evidence that an important measure of market power—the average markup—has risen significantly (figure 1, left panel; De Loecker, Eeckhout, and Unger 2020). A natural question is whether these patterns are related.
DOI: https://doi.org/10.17016/2380-7172.3471
Measuring Unemployment Risk
In this note, we introduce a measure of unemployment risk, the likelihood of a worker becoming unemployed within the next twelve months. By using nonparametric machine learning applied to data on millions of workers in the US, we can estimate how unemployment risk varies across individuals and over time.
DOI: https://doi.org/10.17016/2380-7172.3453
Primary and Secondary Markets for Stablecoins
Stablecoins are increasingly important in decentralized finance (DeFi) and crypto asset markets, and their prominence has led to greater scrutiny of their unique role as expressions of the U.S. dollar running on blockchain networks. Stablecoins attempt to perform a mechanically complex function – to remain pegged to the dollar, even during periods of market volatility.
DOI: https://doi.org/10.17016/2380-7172.3447
Private Credit: Characteristics and Risks
Private credit or private debt investments are debt-like, non-publicly traded instruments provided by non-bank entities, such as private credit funds or business development companies (BDCs), to fund private businesses. Private credit is typically extended to middle-market firms with annual revenues between $10 million and $1 billion, but has grown rapidly in recent years to fund larger companies that were traditionally funded by leveraged loans.
DOI: https://doi.org/10.17016/2380-7172.3462
Supply vs Demand Factors Influencing Prices of Manufactured Goods
The strong surge and rapid retreat of U.S. goods price inflation during 2021-2023 has occupied the forefront of economic policy discussions, and debate on the primary causes continues. Some commentators point to widespread supply bottlenecks and adverse geo-political events that caused significant disruption to the production and availability of manufactured goods.
DOI: https://doi.org/10.17016/2380-7172.3465
Implications of a U.S. CBDC for International Payments and the Role of the Dollar
Technological advances in recent decades have brought about a wave of private-sector innovation in payments and have led central banks to explore a variety of improvements to their payment systems, including the possibility of issuing a central bank digital currency (CBDC). Survey evidence from the Bank for International Settlements (BIS) shows that over 90% of central banks are exploring CBDCs (Kosse & Mattei, 2022). The Federal Reserve is also exploring the implications of, and options for, introducing a CBDC.
DOI: https://doi.org/10.17016/2380-7172.3435
The Federal Reserve’s responses to the post-Covid period of high inflation
In the face of the COVID-19 pandemic in March 2020, the Federal Reserve committed to using its full range of tools to support the U.S. economy. Over the next year and a half, with progress on vaccinations and strong policy support, indicators of economic activity and employment strengthened while inflation moved higher. Faced with a tight labor market and elevated inflation, the Federal Open Market Committee (FOMC) began a process of unwinding the very accommodative stance of monetary policy and moving to a restrictive policy stance to address inflation pressures. Here we review the sequence of actions taken by the Committee between late 2020 and mid-2023 as well as discuss some issues it contemplated along the way; the table provides a chronological list of key events over this period.
DOI: https://doi.org/10.17016/2380-7172.3455
Governance of Permissionless Blockchain Networks
A permissionless blockchain network is a system of physically distributed computers running a copy of a shared ledger and using the same software rules that enable all network participants to “read, submit, and validate transactions” (Beck, Müller-Bloch, and King, 2018, p. 1022). A permissionless system’s accessibility stands in contrast to that of permissioned systems, in which a central authority pre-selects validators and potentially restricts viewing and submission rights (Krause, Natarajan, and Gradstein, 2017; Beck, Müller-Bloch, and King, 2018).
DOI: https://doi.org/10.17016/2380-7172.3443
Assessing China's Efforts to Increase Self-Reliance
Since the beginning of 2018, the United States and China have been increasing tariff rates on each other's imports, spurring debates about a possible fragmentation of trade into blocs of aligned countries (Pierce and Yu (2023), Alfaro and Chor (2023)). Later that year, in a November 2018 speech to workers at a state-owned enterprise, President Xi Jinping mentioned that current events were forcing China to "travel the road of self-reliance."
DOI: https://doi.org/10.17016/2380-7172.3436
Inflation Perceptions During the Covid Pandemic and Recovery
Since 2016, the Michigan Surveys of Consumers (MSC) have included questions on inflation perceptions—what people believe inflation to have been—that are worded symmetrically with their long-standing questions on inflation expectations. The questions on inflation perceptions are currently posed four times a year—in February, May, August, and November. Using available data at the time, Axelrod, Lebow, and Peneva (2018) concluded that inflation expectations and perceptions are very similar and that if perceptions were to change, expectations were likely to change as well.
DOI: https://doi.org/10.17016/2380-7172.3439
Does the Ability to Work Remotely Alter Labor Force Attachment? An Analysis of Female Labor Force Participation
At the onset of the COVID-19 pandemic, a large share of the employed switched to remote work. According to the Bureau of Labor Statistics (BLS)'s Current Population Survey (CPS), almost 40 percent of workers were working remotely in May 2020 because of the pandemic (figure 1, purple line), adding to the evidence from other individual- and firm-level surveys.
DOI: https://doi.org/10.17016/2380-7172.3433
Changes in the U.S. Economy and Rural-Urban Employment Disparities
In the United States, long-term changes in the nature of the economy – including advances in technological innovation and automation, declines in the extraction of certain energy resources, increases in globalization, and a shift to the "knowledge-based" economy – have coincided with disproportionately negative employment outcomes in many rural, or "nonmetro," communities, especially for prime working-age men and those with less than a high school degree.
DOI: https://doi.org/10.17016/2380-7172.3428
The Effects of Credit Score Migration on Subprime Auto Loan and Credit Card Delinquencies
In the early stages of the pandemic, income support and forbearance programs led consumer loan delinquency rates to fall to near-record lows for borrowers across the credit score distribution. Since the second half of 2021, however, delinquency rates have risen, and by 2023:Q3, overall rates for auto and credit card loans had risen above their pre-pandemic levels.
DOI: https://doi.org/10.17016/2380-7172.3419
Question design and the gender gap in financial literacy
Many surveys have measured people's financial literacy with a standard set of questions covering interest, inflation, and investment diversification. Results from these surveys have consistently shown that women are less likely than men to answer the financial literacy questions correctly – the so-called financial literacy gender gap.
DOI: https://doi.org/10.17016/2380-7172.3415
Disclaimer: FEDS Notes are articles in which Board staff offer their own views and present analysis on a range of topics in economics and finance. These articles are shorter and less technically oriented than FEDS Working Papers and IFDP papers.