People expecting “market guidance” from the U.S. Federal Reserve (Fed) proceedings last week at Jackson Hole, Wyoming, got nothing. That is as it should be. The Fed communicates its policy intent through open market operations. Here is what the Fed is telling us.
The Fed’s policy interest rate – the federal funds rate (the only interest rate it directly controls) – traded at 0.08 percent last Friday, significantly below its 0.25 percent target and was roughly identical to the 0.10 percent observed a year earlier.
The monetary base – the only aggregate directly controlled by the Fed (because that is the liability side of its balance sheet) – last Wednesday (August 20) was 20 percent above its year-earlier level, marking an average monthly expansion of $44.8 billion since the beginning of the year.
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