Finance and Economics Discussion Series: Accessible versions of figures for 2018-004

Quantitative Easing and the “New Normal” in Monetary Policy

Accessible version of figures


Figure 1: The Nominal Federal Funds Rate, Inflation, and Long-run Inflation Expectations

year/quarter Nominal federal funds rate Inflation (four-quarter basis) Long-run inflation expectations
1965 4.11 1.23  
1965.25 4.22 1.23  
1965.5 4.22 1.25  
1965.75 4.32 1.32  
1966 4.73 1.46  
1966.25 5.11 1.96  
1966.5 5.64 2.48  
1966.75 5.80 3.02  
1967 5.01 3.06  
1967.25 4.13 2.92  
1967.5 4.03 2.98  
1967.75 4.32 3.11  
1968 4.97 3.68  
1968.25 6.25 4.17  
1968.5 6.21 4.38  
1968.75 6.18 4.54  
1969 6.88 4.53  
1969.25 8.81 4.58  
1969.5 9.53 4.62  
1969.75 9.49 4.63  
1970 9.07 4.61  
1970.25 8.32 4.53  
1970.5 7.04 4.49  
1970.75 5.81 4.71  
1971 3.99 4.89  
1971.25 4.74 4.90  
1971.5 5.70 4.73  
1971.75 4.93 3.91  
1972 3.66 3.60  
1972.25 4.46 3.15  
1972.5 4.92 2.96  
1972.75 5.35 3.02  
1973 6.85 2.76  
1973.25 8.25 3.43  
1973.5 11.30 4.00  
1973.75 10.67 4.76  
1974 9.93 5.76  
1974.25 12.08 6.86  
1974.5 13.05 8.36  
1974.75 9.94 9.39  
1975 6.60 9.64  
1975.25 5.65 8.70  
1975.5 6.44 7.37  
1975.75 5.64 6.57  
1976 5.02 6.14  
1976.25 5.41 5.81  
1976.5 5.50 5.87  
1976.75 5.06 5.80  
1977 4.84 5.94  
1977.25 5.37 6.27  
1977.5 6.07 6.37  
1977.75 6.83 6.29  
1978 7.09 6.21  
1978.25 7.66 6.41  
1978.5 8.55 6.47 6.2
1978.75 10.20 6.79  
1979 10.75 6.56  
1979.25 10.87 7.00 6.75
1979.5 11.73 7.11  
1979.75 14.76 7.39  
1980 16.50 8.45  
1980.25 13.70 8.49  
1980.5 10.47 8.86 8.61
1980.75 17.43 9.21 8.82
1981 18.31 9.00 8.28
1981.25 19.76 8.65 7.87
1981.5 19.52 8.27 7.62
1981.75 14.77 7.62 7.73
1982 15.49 6.86 7.16
1982.25 15.85 6.34 6.76
1982.5 11.81 6.11 6.765
1982.75 9.87 5.75 6.6
1983 9.17 5.66 6.32
1983.25 9.33 5.10 6.58
1983.5 10.07 5.03 6.63
1983.75 10.03 4.44 6.65
1984 10.32 4.08 6.58
1984.25 11.29 4.48 6.505
1984.5 12.24 3.90 6.05
1984.75 9.85 3.82 5.7
1985 8.97 4.19 5.36
1985.25 8.36 3.93 5.475
1985.5 8.34 4.03 5.695
1985.75 8.56 4.01 5.615
1986 8.26 3.72 5.285
1986.25 7.27 3.48 5.2533
1986.5 6.50 3.10 5.12
1986.75 6.56 3.20 5.1067
1987 6.51 2.74 5.285
1987.25 6.98 3.03 5.295
1987.5 7.18 3.25 5.48
1987.75 7.27 3.48 5.14
1988 6.99 3.80 5.235
1988.25 7.52 4.06 5.045
1988.5 8.43 4.32 4.92
1988.75 8.97 4.39 4.6667
1989 10.05 4.50 4.69
1989.25 10.36 4.18 4.74
1989.5 9.65 3.75 4.53
1989.75 9.13 3.56 4.305
1990 8.72 3.63  
1990.25 8.72 3.84 4.27
1990.5 8.62 4.11 4.39
1990.75 8.17 4.03 4.3
1991 6.74 3.76 4.315
1991.25 6.12 3.41 4.34
1991.5 5.89 3.31  
1991.75 5.00 3.26 4
1992 4.16 3.16 3.7
1992.25 3.90 3.12 3.9
1992.5 3.36 2.81 3.75
1992.75 3.13 2.78 3.6
1993 3.13 2.71 3.5
1993.25 3.09 2.77 3.7
1993.5 3.15 2.74 3.45
1993.75 3.08 2.52 3.45
1994 3.31 2.28 3.45
1994.25 4.08 2.19 3.5
1994.5 4.65 2.18 3.5
1994.75 5.38 2.18 3.5
1995 6.06 2.24 3.3
1995.25 6.29 2.14 3.35
1995.5 6.05 2.06 3.2
1995.75 5.97 2.05 3
1996 5.59 1.94 3
1996.25 5.46 1.83 3
1996.5 5.53 1.82 3
1996.75 5.50 1.88 3
1997 5.50 1.88 3
1997.25 5.76 1.92 2.85
1997.5 5.77 1.69 3
1997.75 5.74 1.44 2.65
1998 5.76 1.33 2.6
1998.25 5.73 1.12 2.5
1998.5 5.77 1.24 2.5
1998.75 5.05 1.23 2.5
1999 4.91 1.28 2.3
1999.25 4.93 1.29 2.5
1999.5 5.30 1.28 2.5
1999.75 5.53 1.43 2.5
2000 5.92 1.66 2.5
2000.25 6.57 1.67 2.5
2000.5 6.83 1.79 2.5
2000.75 6.78 1.81 2.5
2001 5.84 1.83 2.5
2001.25 4.48 1.89 2.5
2001.5 3.61 1.72 2.5
2001.75 2.19 1.75 2.55
2002 1.77 1.47 2.5
2002.25 1.79 1.66 2.5
2002.5 1.78 1.89 2.5
2002.75 1.48 1.73 2.45
2003 1.28 1.69 2.5
2003.25 1.27 1.47 2.5
2003.5 1.04 1.36 2.5
2003.75 1.02 1.36 2.5
2004 1.02 1.66 2.5
2004.25 1.03 1.90 2.5
2004.5 1.46 1.95 2.5
2004.75 2.00 2.07 2.5
2005 2.53 2.17 2.45
2005.25 3.03 2.09 2.5
2005.5 3.57 2.05 2.5
2005.75 4.12 2.23 2.5
2006 4.62 2.11 2.5
2006.25 5.10 2.25 2.5
2006.5 5.46 2.37 2.5
2006.75 5.46 2.13 2.5
2007 5.47 2.34 2.35
2007.25 5.47 2.02 2.4
2007.5 5.28 1.97 2.4
2007.75 4.66 2.22 2.4
2008 3.28 2.09 2.5
2008.25 2.14 2.24 2.5
2008.5 1.99 2.20 2.5
2008.75 0.52 1.63 2.5
2009 0.18 1.17 2.4
2009.25 0.18 1.16 2.5
2009.5 0.16 0.99 2.5
2009.75 0.12 1.41 2.26
2010 0.14 1.54 2.39
2010.25 0.20 1.32 2.4
2010.5 0.19 1.28 2.3
2010.75 0.19 0.97 2.2
2011 0.16 1.05 2.3
2011.25 0.09 1.39 2.4
2011.5 0.08 1.65 2.4
2011.75 0.07 1.84 2.5
2012 0.10 2.06 2.3
2012.25 0.16 1.93 2.48
2012.5 0.15 1.73 2.35
2012.75 0.16 1.76 2.3
2013 0.15 1.62 2.3
2013.25 0.12 1.43 2.3
2013.5 0.08 1.47 2.21
2013.75 0.09 1.48 2.3
2014 0.07 1.47 2.3
2014.25 0.09 1.69 2.25
2014.5 0.09 1.72 2.2
2014.75 0.10 1.55 2.2
2015 0.11 1.43 2.1
2015.25 0.13 1.36 2.14
2015.5 0.14 1.34 2.15
2015.75 0.16 1.36 2.15
2016 0.37 1.59 2.12
2016.25 0.38 1.60 2.2
2016.5 0.40 1.68 2.15

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Figure 2: The Real Federal Funds Rate and Estimates of r*

year/quarter r* (Kiley, 2015) r* (Laubach and Williams, 2003) Real federal funds rate r* (Del Negro et al, 2017)
1965 2.317 4.582 2.876 2.255
1965.25 2.316 4.586 2.989 2.248
1965.5 2.313 4.583 2.969 2.242
1965.75 2.307 4.568 2.999 2.236
1966 2.301 4.542 3.271 2.226
1966.25 2.295 4.516 3.147 2.213
1966.5 2.288 4.494 3.158 2.206
1966.75 2.281 4.471 2.782 2.193
1967 2.274 4.447 1.943 2.180
1967.25 2.267 4.423 1.213 2.174
1967.5 2.260 4.399 1.041 2.164
1967.75 2.251 4.370 1.208 2.155
1968 2.239 4.333 1.296 2.142
1968.25 2.228 4.286 2.085 2.131
1968.5 2.217 4.237 1.829 2.117
1968.75 2.205 4.190 1.638 2.114
1969 2.193 4.140 2.350 2.111
1969.25 2.181 4.089 4.231 2.098
1969.5 2.170 4.043 4.916 2.090
1969.75 2.160 4.003 4.857 2.085
1970 2.152 3.971 4.458 2.080
1970.25 2.144 3.942 3.785 2.077
1970.5 2.138 3.914 2.547 2.067
1970.75 2.131 3.890 1.097 2.058
1971 2.123 3.865 -0.896 2.051
1971.25 2.116 3.836 -0.161 2.055
1971.5 2.110 3.813 0.979 2.060
1971.75 2.104 3.793 1.025 2.055
1972 2.096 3.770 0.058 2.059
1972.25 2.087 3.735 1.308 2.068
1972.5 2.078 3.694 1.961 2.072
1972.75 2.066 3.647 2.339 2.075
1973 2.052 3.589 4.093 2.095
1973.25 2.040 3.525 4.813 2.101
1973.5 2.027 3.466 7.293 2.115
1973.75 2.014 3.412 5.902 2.117
1974 2.002 3.361 4.161 2.121
1974.25 1.992 3.319 5.220 2.127
1974.5 1.987 3.287 4.683 2.131
1974.75 1.987 3.269 0.543 2.129
1975 1.988 3.263 -3.038 2.133
1975.25 1.987 3.262 -3.056 2.145
1975.5 1.985 3.257 -0.928 2.149
1975.75 1.984 3.248 -0.927 2.153
1976 1.983 3.236 -1.121 2.160
1976.25 1.985 3.226 -0.397 2.174
1976.5 1.988 3.223 -0.362 2.176
1976.75 1.991 3.226 -0.734 2.172
1977 1.993 3.230 -1.102 2.175
1977.25 1.993 3.230 -0.900 2.179
1977.5 1.995 3.227 -0.300 2.181
1977.75 1.999 3.228 0.541 2.182
1978 2.001 3.232 0.879 2.181
1978.25 2.000 3.224 1.251 2.171
1978.5 2.001 3.203 2.089 2.166
1978.75 2.001 3.184 3.415 2.159
1979 2.002 3.167 4.197 2.143
1979.25 2.004 3.154 3.872 2.126
1979.5 2.006 3.142 4.616 2.107
1979.75 2.009 3.131 7.367 2.113
1980 2.015 3.125 8.050 2.128
1980.25 2.024 3.130 5.212 2.112
1980.5 2.029 3.142 1.609 2.115
1980.75 2.031 3.143 8.225 2.128
1981 2.035 3.132 9.317 2.130
1981.25 2.039 3.122 11.108 2.150
1981.5 2.044 3.116 11.255 2.172
1981.75 2.054 3.116 7.151 2.168
1982 2.064 3.130 8.631 2.183
1982.25 2.075 3.150 9.513 2.184
1982.5 2.087 3.171 5.707 2.173
1982.75 2.098 3.195 4.125 2.156
1983 2.106 3.216 3.510 2.170
1983.25 2.112 3.227 4.230 2.182
1983.5 2.115 3.230 5.035 2.202
1983.75 2.116 3.227 5.597 2.210
1984 2.116 3.218 6.236 2.213
1984.25 2.116 3.207 6.815 2.231
1984.5 2.116 3.195 8.337 2.236
1984.75 2.114 3.185 6.027 2.230
1985 2.112 3.175 4.779 2.229
1985.25 2.109 3.162 4.435 2.214
1985.5 2.106 3.147 4.310 2.197
1985.75 2.102 3.131 4.551 2.182
1986 2.099 3.116 4.538 2.152
1986.25 2.096 3.102 3.789 2.130
1986.5 2.091 3.089 3.396 2.117
1986.75 2.086 3.076 3.363 2.115
1987 2.080 3.063 3.773 2.115
1987.25 2.073 3.049 3.948 2.134
1987.5 2.066 3.031 3.931 2.148
1987.75 2.057 3.009 3.788 2.164
1988 2.048 2.983 3.189 2.167
1988.25 2.039 2.957 3.466 2.184
1988.5 2.029 2.929 4.105 2.203
1988.75 2.017 2.898 4.574 2.220
1989 2.006 2.862 5.548 2.235
1989.25 1.994 2.823 6.182 2.246
1989.5 1.982 2.781 5.893 2.256
1989.75 1.968 2.738 5.567 2.272
1990 1.954 2.692 5.098 2.295
1990.25 1.941 2.645 4.875 2.317
1990.5 1.931 2.604 4.511 2.329
1990.75 1.923 2.573 4.131 2.342
1991 1.914 2.552 2.978 2.360
1991.25 1.906 2.532 2.712 2.378
1991.5 1.900 2.512 2.576 2.388
1991.75 1.894 2.494 1.742 2.394
1992 1.889 2.477 0.998 2.404
1992.25 1.883 2.459 0.781 2.404
1992.5 1.878 2.444 0.543 2.395
1992.75 1.873 2.433 0.348 2.394
1993 1.870 2.431 0.416 2.387
1993.25 1.866 2.438 0.317 2.400
1993.5 1.863 2.451 0.410 2.417
1993.75 1.859 2.466 0.562 2.438
1994 1.855 2.483 1.033 2.465
1994.25 1.850 2.501 1.889 2.494
1994.5 1.846 2.524 2.471 2.519
1994.75 1.841 2.550 3.200 2.547
1995 1.837 2.582 3.824 2.562
1995.25 1.833 2.619 4.150 2.560
1995.5 1.828 2.658 3.997 2.563
1995.75 1.823 2.697 3.920 2.563
1996 1.817 2.735 3.654 2.570
1996.25 1.810 2.769 3.629 2.593
1996.5 1.802 2.799 3.706 2.608
1996.75 1.794 2.829 3.616 2.613
1997 1.784 2.857 3.623 2.626
1997.25 1.773 2.881 3.836 2.627
1997.5 1.761 2.901 4.077 2.616
1997.75 1.748 2.918 4.299 2.604
1998 1.734 2.932 4.428 2.595
1998.25 1.720 2.942 4.618 2.565
1998.5 1.703 2.945 4.531 2.532
1998.75 1.685 2.939 3.818 2.499
1999 1.667 2.927 3.636 2.478
1999.25 1.648 2.912 3.644 2.454
1999.5 1.627 2.889 4.018 2.433
1999.75 1.605 2.857 4.098 2.416
2000 1.582 2.819 4.267 2.393
2000.25 1.557 2.775 4.894 2.370
2000.5 1.533 2.726 5.047 2.348
2000.75 1.508 2.679 4.969 2.331
2001 1.485 2.633 4.010 2.318
2001.25 1.462 2.588 2.594 2.325
2001.5 1.442 2.545 1.895 2.332
2001.75 1.421 2.503 0.442 2.333
2002 1.399 2.461 0.307 2.342
2002.25 1.378 2.419 0.130 2.342
2002.5 1.359 2.381 -0.111 2.340
2002.75 1.341 2.348 -0.256 2.347
2003 1.324 2.318 -0.414 2.356
2003.25 1.305 2.287 -0.196 2.355
2003.5 1.286 2.250 -0.320 2.363
2003.75 1.267 2.209 -0.343 2.361
2004 1.248 2.170 -0.633 2.352
2004.25 1.229 2.132 -0.869 2.341
2004.5 1.211 2.093 -0.492 2.315
2004.75 1.191 2.052 -0.074 2.289
2005 1.172 2.009 0.367 2.262
2005.25 1.152 1.963 0.935 2.229
2005.5 1.132 1.914 1.518 2.197
2005.75 1.111 1.861 1.882 2.175
2006 1.088 1.802 2.515 2.152
2006.25 1.066 1.738 2.855 2.131
2006.5 1.043 1.672 3.098 2.103
2006.75 1.019 1.601 3.328 2.074
2007 0.995 1.523 3.138 2.040
2007.25 0.969 1.438 3.451 2.004
2007.5 0.944 1.345 3.309 1.961
2007.75 0.919 1.248 2.441 1.909
2008 0.896 1.153 1.188 1.862
2008.25 0.875 1.060 -0.104 1.823
2008.5 0.861 0.974 -0.214 1.783
2008.75 0.853 0.905 -1.112 1.749
2009 0.847 0.853 -0.987 1.713
2009.25 0.843 0.809 -0.973 1.701
2009.5 0.839 0.765 -0.827 1.692
2009.75 0.836 0.719 -1.284 1.680
2010 0.833 0.673 -1.407 1.673
2010.25 0.831 0.629 -1.124 1.650
2010.5 0.829 0.585 -1.095 1.619
2010.75 0.829 0.544 -0.777 1.604
2011 0.829 0.510 -0.890 1.588
2011.25 0.830 0.480 -1.295 1.560
2011.5 0.831 0.451 -1.563 1.526
2011.75 0.831 0.422 -1.770 1.495
2012 0.832 0.393 -1.960 1.470
2012.25 0.834 0.367 -1.771 1.455
2012.5 0.837 0.346 -1.587 1.441
2012.75 0.841 0.331 -1.600 1.436
2013 0.844 0.318 -1.470 1.433
2013.25 0.847 0.307 -1.313 1.429
2013.5 0.849 0.297 -1.385 1.431
2013.75 0.852 0.286 -1.392 1.427
2014 0.855 0.277 -1.398 1.422
2014.25 0.856 0.270 -1.600 1.411
2014.5 0.856 0.259 -1.625 1.401
2014.75 0.857 0.246 -1.452 1.387
2015 0.858 0.236 -1.315 1.376
2015.25 0.858 0.226 -1.233 1.360
2015.5 0.858 0.218 -1.202 1.347
2015.75 0.859 0.214 -1.197 1.334
2016 0.860 0.213 -1.228 1.323
2016.25 0.860 0.215 -1.222 1.317
2016.5 0.860 0.216 -1.274 1.315
as of January 25       1.321

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Figure 3: Effect of Reductions in Federal Funds Rate and $500 Billion QE

The figure reports the effects of changes in the short-term interest rate and a $500 billion quantitative easing program on the short-term interest rate, 10-year Treasury yield, output gap, and inflation.

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Figure 4: Outcomes under Alternative Approaches

case ELB frequency mean Output mean π RMSD Output RMSD π-2
QE D 22.7 -0.1 1.9 2.5 1.6
Overshooting 22 -0.1 2 2.5 1.4
π*=3 20.2 -0.4 2.7 2.8 1.9

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