In this note, we analyze the effects of the ON RRP operations on daily repo rate uncertainty--based on revisions to the repo rate forecast--and intraday repo rate volatility.
Quantifying the magnitude and establishing the timing of the pass-through of oil price changes to consumer prices is crucial for forecasting inflation. Characterizing this pass-through is particularly important because oil prices tend to undergo wide fluctuations.
The Increased Role of the Federal Home Loan Bank System in Funding Markets, Part 3: Implications for Financial Stability
This note is the third part in a three part series. Part 1 provides some historical background and discusses key institutional characteristics of the Federal Home Loan Banks (FHLB) System. Part 2 highlights some of the recent trends in the FHLB system and potential drivers of those trends. This note discusses the implication of these developments for financial stability.
The Increased Role of the Federal Home Loan Bank System in Funding Markets, Part 2: Recent Trends and Potential Drivers
This note is the second part in a three part series. Part 1 provides some historical background and discusses key institutional characteristics of the Federal Home Loan Banks (FHLB) System. This note discusses recent trends in the FHLB system and potential drivers of those trends.
The Federal Home Loan Bank (FHLB) system was founded in 1932 to support mortgage lending by thrifts and insurance companies. Over time, the system has grown into a provider of funding for a larger range of financial institutions, including commercial banks and insurance companies.
The Federal Reserve's G.17 release on industrial production (IP) and capacity utilization published on September 15, 2017, included one of the first estimates of the impact on a specific measure of economic activity by Hurricane Harvey, which made landfall in Texas on August 25. As reported in the release, total industrial production fell 0.9 percent in August, most of which (about 3/4 percentage point) could be accounted for by storm-related outages.
This note considers a puzzle: why has information technology (IT) equipment investment in the National income and Product Accounts (NIPAs) been so weak since 2007 at the same time that financial reports indicate massive increases in capital expenditures by IT service companies?
This note introduces a shadow rate term structure model based on OIS rates and surveys to quantify federal funds rate expectations and term premiums over horizons ranging from one month to five years. The model implies that term premiums vary over time and can be substantial in magnitude, even at relatively short horizons.
Since bottoming out in 2012, house prices in the U.S. have recovered rapidly. According to Zillow, the median home value has been growing about 6 percent per year. While incomes have also been recovering, they have not quite kept pace with home prices.
Data collected under the Home Mortgage Disclosure Act (HMDA) reveal that the largest banks have significantly reduced their share of mortgage lending to low- and moderate-income (LMI) households in recent years.
Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances
Data from the newly released 2016 Survey of Consumer Finances show wealth has grown for families across race and ethnicity groups since 2013, but substantial disparities between groups persist.
The U.S. unemployment rate has fallen steadily since 2010, indicating broad-based improvement in the labor market. However, disaggregated measures reveal divergences between regions and types of workers.
An earlier Feds note used staff models to provide a projection for the evolution of the SOMA portfolio and an estimate of the associated term premium effect (TPE) on the 10-year Treasury yield. That analysis relied on economic, financial, and monetary policy assumptions as of April 2017. With the Federal Open Market Committee (FOMC) announcing a change in its reinvestment policy in its September 2017 post-meeting statement, this note provides updated projections.
The target range for the federal funds rate has increased a few times since its liftoff from the effective lower bound (ELB) in December 2015 and currently stands at 1 to 1-1/4 percent. According to standard macroeconomic models, ELB risk--how likely it is for the policy rate to be constrained by the ELB in the near- and medium-term future--has important implications for interest rate policy.
Exchange traded funds (ETFs) achieve their investment objectives by either owning a portfolio of securities (physical ETFs) or entering into swap agreements that deliver the returns of pre-specified indexes (synthetic ETFs).
In this note, we describe an algorithm, developed in Carlson, Shan, and Warusawitharana (2013), to match banks that are geographically close and are similar in size and business model. Concurrently, we also release a data set of matched banks obtained from applying this algorithm from 1998 to 2014, as well as some of the associated computer programs.
An earlier Feds note provided information about the structure of the FOMC meeting minutes and the use of "quantitative" or "counting" words to characterize the number of policymakers aligned with particular views. This note extends that analysis through 2016.
According to the Bureau of Economic Analysis, real GDP rose at an annual rate of 1.2 percent in the first quarter of this year, a step down from the 2.3 percent pace in the second half of last year.
It is well known by now that before the financial crisis, systemically important banks and nonbank broker-dealers maintained large proprietary trading operations and had relied on those operations as a key source of trading revenue, in addition to revenue generated by facilitating clients' trading needs.
Trading Activities at Systemically Important Banks, Part 2: What Happened during Recent Risk Events?
As documented in the FEDS Notes article "Trading Activities at Systemically Important Banks, Part 1: Recent Trends in Trading Performance," trading performance at systemically important banks, measured by trading revenue per dollar of value-at-risk (VaR) committed, has trended up over the past few years.
Using a confidential data set collected daily by onsite supervisors, this note provides a comprehensive look at the performance of systemically important banks’ trading and market-making activities since the financial crisis.
This note analyzes recent trends in loan growth at domestic bank holding companies (hereafter, banks) and reviews factors related to bank loan growth such as capital and loan write-downs.
In this note we analyze the systemic nature of settlement fails--the failure to deliver the agreed upon securities--during the 2007-09 period. Large and protracted settlement fails are believed to undermine the liquidity and well-functioning of securities markets, and as a result market groups and policymakers have tried to limit them.
Most accounts of the "Great Moderation"--a decline in macroeconomic volatility in the decades prior to the Great Recession--focus on employment growth and GDP growth.
In this second of two notes we study how dealers deleverage following the 2007-2008 funding squeeze.
More than half of auto financing is originated by non-bank finance companies that typically rely on short-term funding markets for their own financing. During the recent financial crisis, disruptions in these short-term financing markets reduced the availability of auto credit to consumers, which contributed to the decline in auto sales.
This is the first of two notes that empirically document the behavior of U.S. Primary Dealers during the 2007-08 financial crisis. In this note we show that dealers' exposure to risky assets drives the observed repo funding squeeze; moreover, as evident from Lehman's experience, we show that repos become subject to counterparty risk during periods of stress, even when collateralized by the safest assets.
As noted in the Policy Normalization Principles and Plans issued in September 2014, when the Federal Open Market Committee (FOMC) judges that it is appropriate to begin the process of normalizing the size of the balance sheet, it intends to gradually reduce the Federal Reserve's holdings of Treasury securities and agency debt and agency mortgage-backed securities (MBS).
The Financial Accounts of the United States reports quarterly net equity issuance of nonfinancial corporations.
In the U.S., geography has long been viewed as a proxy for income and race.
Unfavorable macroeconomic and financial scenarios are a core element of bank stress tests, and the degree to which variables deteriorate in a scenario--i.e., the scenario’s severity--is a central design feature of any stress test exercise
Job reallocation in the U.S.--the sum of job creation and job destruction across employers--has been declining over several decades.
In an effort to promote more accommodative financial conditions following the financial crisis of 2008 and the ensuing recession, and at a time when the conventional monetary policy tool--the federal funds rat--was at its effective lower bound, the Federal Reserve conducted large-scale asset purchases (LSAPs) and a maturity extension program (MEP).
Ample empirical research documents the negative effect of uncertainty on economic activity. Unexpected changes in macroeconomic conditions or doubts about the direction of future policy tend to be associated with lower capital investments, reduced hiring, and slower consumer spending.
This Note explains the differences between two of the models used to produce estimates of US Treasury term premiums which are produced by staff in the Federal Reserve System.
Over the past decade, many U.S. states have enacted policies that temporarily exempt consumer purchases of certain goods from state sales taxes.
As described in a recent statement and blog post, the Federal Reserve Bank of New York (FRBNY), in cooperation with the Office of Financial Research (OFR), is considering the publication of several new benchmark rates for overnight Treasury general collateral repurchase agreement (repo) transactions in order to enhance market transparency and efficiency by improving the quality and breadth of repo market information available to the public.
The Basel Committee on Banking Supervision (BCBS, the Basel Committee, or Basel) has developed a methodology for identifying global systemically important banks (G-SIBs) and standards for requiring G-SIBs to hold more common equity.
In response to the financial crisis of 2008 and the subsequent recession, the Federal Reserve employed large-scale asset purchases (LSAPs) and a maturity extension program (MEP) with the purpose of reducing longer-term interest rates, and thereby promoting more accommodative financial conditions at a time when the conventional monetary policy tool, the federal funds rate, was at its effective lower bound.
Human capital and stocks both provide rewards to those who invest in them, the former through higher future earnings and the latter through appreciation or dividends. The decision to invest in them depends on the relative rewards each asset offers.
Demand for Voluntary Balance Requirements: the U.S. Experience with Contractual Clearing Balances from 2000 to 2007
Contractual clearing balances were a type of balance that a depository institution could voluntarily agree to hold in their account at the Federal Reserve in addition to mandatory reserve requirements, or reserve balance requirements (RBR) prior to 2012.
Disclaimer: FEDS Notes are articles in which Board economists 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.