IMF高級宏觀經(jīng)濟(jì)學(xué)研修班課程CT1405MMF-L03Moneta課件

MonetaryPolicyTransmissionMechanismCTPTrainingProgramMacroeconomicManagementandFinancialSectorIssuesCT14.05PresenterTaoWuMonetaryPolicyTransmissionMContentOutlineGeneralIssuesaboutMonetaryPolicyObjectives:Whatmonetarypolicycanandcannotdo.Choiceofpolicyinstruments:directorindirect?Choiceofoperatingtarget:interestrateormonetaryaggregates?TransmissionMechanism:Howdoesmonetarypolicywork?Interestrate,Credit,Assetprice,ExchangerateRecentMonetaryPolicyIssues:TheU.S.FederalReserve’sUnconventionalMonetaryPolicyOperations2ThistrainingmaterialisthepropertyoftheInternationalMonetaryFund(IMF)andisintendedforuseinIMFInstitutecourses.AnyreuserequiresthepermissionoftheIMFInstitute.”ContentOutlineGeneralIssuesWhatMonetaryPolicyCanandCannotDoWhatMonetaryPolicyCanandCWhatMonetaryPolicyCanandCannotDo“Weareindangerofassigningtomonetarypolicyalargerrolethanitcanperform,indangerofaskingittoaccomplishtasksthatitcannotachieve,and,asaresult,indangerofpreventingitfrommakingthecontributionthatitiscapableofmaking.””

—PresidentialaddressofMiltonFriedmanatthe80thAnnualMeetingoftheAmericanEconomicAssociation,1967.WhatMonetaryPolicyCanandCWhatMonetaryPolicyCanandCannotDoLong-runeffectsvs.Short-runeffectsMonetarypolicymaybeeffectiveinshortrun,butitseffectsindeterminingtherealeconomicgrowthoremploymentinlongrunarealmostnegligible.Thebestwayformonetarypolicytopromotelong-runeconomicgrowthistoensurepricestability.Pricingsystemworksmoreefficientlytoallocateresourceswhenpricesareonaveragestable;Toavoiddistortionscausedbytheinteractionofinflationandataxsystembasedontheassumptionthatpricesarestable.WhatMonetaryPolicyCanandCWhatMonetaryPolicyCanandCannotDoCentralbankscannothaveanysubstantialeffectontrendgrowthinoutputortrendgrowthinemployment.policiesbygovernmentthatcanhaveamaterialinfluenceonboth:education,humancapital,technologicalinnovations,taxation,protectionofprivatepropertyrights,etc.However,bykeepinginflationlowandstable,centralbankscanoperatemonetarypolicywiththeobjectiveofkeepingactualoutputandemploymentascloseaspossibletothetrendofpotentialoutput

andemployment.WhatMonetaryPolicyCanandCMonetaryPolicy:ObjectivesPriceStability(lowandstableinflation);ReducedVolatilityofbusinesscycles;CentralbanksmayalsobeconcernedaboutInterestratestabilityandfinancialmarketstability;Exchangeratestability.MonetaryPolicy:ObjectivesPriMonetaryPolicy:ObjectivesWhatdowemeanbypricestability?Pricesarenotchangingonaverage.However,individualpricesmayriseorfall.Whynotzeropercentinflation?UpwardbiasinmeasuredinflationReducetheriskofdeflation(toavoida“l(fā)iquiditytrap”–zeroboundonnominalinterestrates).MonetaryPolicy:ObjectivesWhaTimeGDPCentralBankmayalsobeabletoreducevolatilityofbusinesscyclesTimeGDPCentralBankmayalsobWhatMonetaryPolicyCannotDo:LessonsfromthePhillipsCurveIsthereatrade-offbetweeninflationandunemployment?ThePhillipscurve:WilliamsPhillips(1958),using97yearsoftheU.K.data,showedatradeoffbetweenunemploymentandnominalwagegrowth.DatafortheUSupto1969showedthesame.Whathappensifacentralbanktriestoexploitcontinuouslytheshort-runtrade-offandwantstopersistentlypushtheunemploymentratebelowitspotentiallevel?WhatMonetaryPolicyCannotDoPhillipsCurveintheU.S.:1960-2007PhillipsCurveintheU.S.:19Trade-offsbetweenInflationandUnemploymentForinstance,acentralbankmaydecidetoincreasemoneysupplyorkeepinterestrateslow,therebypushesunemploymentratebelowitspotentiallevelatthepriceofahigherinflation,thusthereseemstobeatrade-offinshortrun.However,inflationsurprisescannotstimulateshort-termemploymentveryoften.Inthelongrun,economicagentswilladjusttheirinflationexpectationsaccordingly.Therefore,discretionarypolicieswillmostlikelyendupwithhigherinflationbutnolowerunemployment.Trade-offsbetweenInflationaTrade-offsbetweentheVolatilitiesofInflationandUnemploymentAssumethattheobjectiveofacentralbankistominimize where isthetargetunemploymentrate;

isthetargetinflationrate; istheinflation-aversionparameter.Centralbankscantrademoreunemploymentoroutputvolatilityforlessinflationvolatility,andviceversa.Trade-offsbetweentheVolatilInstrumentsofMonetaryPolicyInstrumentsofMonetaryPolicy15OperatingTargets(reserves,moneymarketinterestrate,etc)IndicatorvariablesIntermediateTargets(M2,ER,LTinterestrates,Inflationforecast,etc)PolicyObjectives(lowandstableinflation)MonetaryPolicyFrameworkPolicyInstruments(OMO,discountrate,etc)DomesticshocksExternalshocksInflationTargetingPolicyDecision15OperatingTargetsIndicatorMonetaryPolicyFrameworkNeedtoanswerthreequestionswhendesigningamonetarypolicyframework:Whichpolicyinstrumentstouse?Directinstrumentsvs.indirectinstruments?Whatistheoperatingtargetvariable?Targetingprices(interestrates)orquantities(moneysupply,credit)?Whatisthemonetarypolicytransmissionmechanism?Howdoespolicyactionsonoperatingtargettransmittointermediatetargetandthenpolicyobjectives?Howaccurateandhowfastisthetransmission?Choicesbetweenpolicyinstruments,intermediatetargets,andfinalobjectivesmustbecompatible.MonetaryPolicyFrameworkNeedPolicyInstrumentsWhenimplementingmonetarypolicy,centralbankscaneitheractdirectly,usingitsregulatorypower,orindirectly,usingitsinfluenceonmoneymarketconditions.DirectinstrumentsoperatebysettingorlimitingeitherpricesorquantitiesthroughregulationsFocusonthebalancesheetsofcommercialbanks;Indirectinstrumentsactthroughthemarket,byadjustingtheunderlyingdemandfor,andsupplyof,bankreserves;Initialeffectsareonthebalancesheetofthecentralbank.PolicyInstrumentsWhenimplemeDirectInstrumentsDirectControlsoninterestrates Forinstance,minimumandmaximuminterestrates,preferentialratesforcertainloancategories,etc;CreditceilingsAtaggregateleveloronindividualbanks;DirectedlendingpoliciesForinstance,preferentialcentralbankrefinancefacilitiestodirectcredittoprioritysectors;HighreserveandliquidassetrequirementsDesignedbothtoabsorbliquidityandtoprovidegovernmentdeficitfinancing.DirectInstrumentsDirectContrDirectInstrumentsEffectivemeanstoachievenarrowlydefinedtargets:Forinstance,maintainingaparticularinterestrateatacertainlevel,orkeepingabank’soverallcreditexpansionbelowacertainceiling,ordirectingcredittoorawayfromspecificsectors.Mosteffectiveorpracticalapproachincountrieswithunder-developedfinancialmarkets;However,themacroeconomiceffectsofthecontrolsishardtopredict,becauseofthescopeforevasionandavoidance.Forinstance,effectivecreditceilingforcesbankstobuildupexcessliquidity,whichinturndiscouragesdeposittakingandcausesdisintermediation.DirectInstrumentsEffectivemeDirectInstrumentsPreventcompetitionandlimittheexpansionofmoreefficientbanks;Discouragecorrectpricingofcreditrisk,thuspreventingfinancialresourcesfrombeingefficientlyallocated;Discouragethedevelopmentofmoneyandcapitalmarkets;Inconsistentwithfreedomofinternationalcapitalmovementandmayencourages“capitalflight.”Createvariousadministrativeproblemsandencouragethedevelopmentofunregulated“grey”marketor“shadowbanking.”DirectInstrumentsPreventcompIndirectInstrumentsOpen-marketoperationsOutrighttransactionsandrepo/reverserepoagreementsStandingfacilities“Lenderoflastresort.”Discountwindow,lendinganddepositfacilities,etc.ReserverequirementsLesspopularinrecentyears;Recenttendencytowardlowerreserverequirements.IndirectInstrumentsIndirectInstrumentsIndirectinstrumentsareconsideredmoremarketfriendlyandarelessdistortionarythandirectinstruments.Focusonsystem-wideliquidity;Transmitpolicysignals;Allowforoptimalallocationoffinancialresourcesonthebasisofriskandreturn.Mostcountrieshavemovedoraremovingtowardsusingindirectinstruments.IndirectInstrumentsIndirectiTransitionalConsiderationsDegreeoffinancialdevelopment.Forinstance,Howdevelopedarethefinancialmarkets?Howcompetitivearethecommercialbanks?Howvulnerableisthebankingsector?Selectionofappropriatetargetvariablesandtheinterpretationofmonetaryindicatorsasguidestopolicy.Difficultiesincontrollingmonetaryaggregatesandcreditgrowthduringandafterthetransition.Agradualapproachmaybepreferred,butnotalways.TransitionalConsiderationsDegChoiceofOperatingTargetChoiceofOperatingTarget25OperatingTargets(reserves,moneymarketinterestrate,etc)IndicatorvariablesIntermediateTargets(M2,ER,LTinterestrates,Inflationforecast,etc)PolicyObjectives(lowandstableinflation)MonetaryPolicyFrameworkPolicyInstruments(OMO,discountrate,etc)DomesticshocksExternalshocksInflationTargetingPolicyDecision25OperatingTargetsIndicatorChoiceofOperatingTargetInstrumentInterestRateInterestRateMoRoM1MoneyMdR1RoMoMoneyInterestRateMoneyTargetInterestRates(R)vs.MoneyStock(M)ChoiceofOperatingTargetInstChoiceofOperatingTargetInterestRates(R)vs.MoneyStock(M)Poole’s(1970)conclusion:Vol.(aggregatedemandshock)>Vol.(moneydemandshock)ChooseM;Vol.(aggregatedemandshock)<Vol.(moneydemandshock) ChooseR;QuantityTheoryofMoneyChoiceofOperatingTargetInteChoiceofMonetaryPolicyInstrumentsInrecentyears,videsamoretransparentsignalofmonetarypolicystance;automaticresponsetomoneydemandshocks,inthefaceoffinancialinnovations.Forinstance,thesimpleTaylorRuleintheU.S.ChoiceofMonetaryPolicyInstMonetaryTransmissionMechanismMonetaryTransmissionMechanisMonetaryTransmissionMechanismHowdomonetarypolicyactionsaffectthemacro-economy?Money-InterestratechannelCreditchannelAssetpricechannelExchangeratechannelMonetaryTransmissionMechanisMonetaryPolicyMarketratesAssetpricesExpectations/ConfidenceExchangerateAggregateDemandImportpricesInflationAtransmissionmechanismofmonetarypolicyOutputProductivityExchangeRatePass-ThroughPolicyRatePass-ThroughMonetaryPolicyMarketratesAs32Traditionalmonetarytransmissionchannel;Theeffectisfeltonthedemandforcredit.MarginalcostofcreditCostsofbusinessinvestmentCostofhousingordurablespurchasesRateofreturntosavingsItistherealinterestratethatdeterminessavings/investmentdecisions.Realinterestrate=NominalInterestrate-E()Money-InterestrateChannel32TraditionalmonetarytransmiInterbankCallRateDiscountRate3-MonthT-billRate1-YearT-BondRate5-YearT-BondRate10-YearT-BondRateLendingRatePolicyRateDepositRateCrucialtotheconductofmonetarypolicyishowthepolicyrateistransmittedtomarketratesatvariousmaturityspectra—interestratepass-through.

InterestRatePass-ThroughInterbankDiscount3-Month1-YePass-throughtoInter-bankMoneyMarketRatesTheeffectofachangeinthepolicyrateoninterestratesinthemoneymarket,i.e.,majorcommercialbank’sborrowingcosts.Generallymoney-marketratesrespondprettyquicklyifmarketsarewelldeveloped;Moneymarketratesmaychangeevenbeforethepolicyratechanges(ifanticipated);However,inperiodsoffinancialturbulence,theresponsemaybeimpaired(e.g.,owingtodefaultriskduringtheU.S.financialcrisis).Pass-throughtoInter-bankMonPercentagepoints,annualizedFailureofLehmanBrothers;AIG(Sep.15-16)G-7action,LehmanCDSsettlement(Oct.10)TAFestablished(Dec.12)TSLFestablished(Mar.11)BearStearnsbailout(Mar.17)Source:TaoWu,2011.“TheU.S.MoneyMarketandtheTermAuctionFacilityinFinancialCrisisof2007-2009,”ReviewofEconomicsandStatistics,Volume93.Percentagepoints,annualizedFPercentagepoints,annualizedFailureofLehmanBrothers;AIG(Sep.15-16)G-7action,LehmanCDSsettlement(Oct.10)TAFestablished(Dec.12)TSLFestablished(Mar.11)BearStearnsbailout(Mar.17)Source:TaoWu,2011.“TheU.S.MoneyMarketandtheTermAuctionFacilityinFinancialCrisisof2007-2009,”ReviewofEconomicsandStatistics,Volume93.Percentagepoints,annualizedFLong-terminterestratesaretheexpectedfutureshort-termratesplustermpremiums:Impactonlonger-terminterestratescangoeitherway,becauselong-terminterestratesdependoncurrentandexpectedfutureshort-terminterestrates,andtermpremiums. Pass-throughtoLong-termInterestRatesLong-terminterestratesaretTheBondYield“Conundrum”TheBondYield“Conundrum”TheBondYield“Conundrum”Long-terminterestrateshavetrendedlowerinrecentmonthsevenastheFederalReservehasraisedthelevelofthetargetfederalfundsrateby150basispoints.Thisdevelopmentcontrastswithmostexperience,whichsuggeststhat,otherthingsbeingequal,increasingshort-terminterestratesarenormallyaccompaniedbyariseinlonger-termyields…Forthemoment,thebroadlyunanticipatedbehaviorofworldbondmarketsremainsaconundrum.—TestimonyofFedChairmanAlanGreenspantotheU.S.Senate,February16,2005TheBondYield“Conundrum”LongLong-terminterestratesaretheexpectedfutureshort-termratesplustermpremiums:Thusinprinciple,centralbankscanadjustmarket’sexpectationsofinflationandfuturepolicyrate,ortermpremiums(liquidityandriskpremiums)toaffectlong-terminterestrates.RecentexamplesincludetheU.S.FederalReserve’smonetarypolicyexercisesduringandafterthemostrecentfinancialcrisis.Pass-throughtoLong-termInterestRatesLong-terminterestratesaret41Creditviewexaminestheeffectofmonetarypolicyonthesupplyofcreditinstead.Itstressesontheimplicationsofasymmetricinformationbetweenborrowersandlenders.Externalfinancepremiumisthedifferencebetweenthecostoffundsraisedexternallyandtheopportunitycostofinternalfunds.Monetarypolicyaffectsnotonlythegenerallevelofinterestratesbutalsothesizeoftheexternalfinancepremium.CreditChannel41Creditviewexaminestheeff42Twomechanismstoexplainthelinkagebetweenmonetarypolicyandexternalfinancepremium.Policytighteningtendstoreducethenetworthofbusinessesandindividuals,makingitharderforthemtoqualifyforloansatanyinterestrate,thusreducingspendingandpricepressures—balancesheetchannelPolicyratehikesalsomakebankslessprofitableingeneralandthuslesswillingtolend—banklendingchannelCreditChannel42Twomechanismstoexplainth43Factorsraisingtheimportanceofthecreditchannel:HighdependenceuponbankcreditLowdevelopmentofdomesticcapitalmarketsInadequatelegalprotectionofcreditorsEmpirically,therelativeavailabilityofbankcreditmaybeausefulpredictoroffutureinvestmentandoutput.CreditChannel43FactorsraisingtheimportanAssetPriceChannelMonetarypolicyaffectsassetprices(equitiesandrealestates);Changesinassetprices,inturn,affectconsumptionandinvestment.AssetPriceChannelMonetarypoEffectsonHouseholdConsumptionEquityandrealestatepricesaffect:Householdwealthandhenceconsumption(wealtheffect)Household’sborrowingcapacitytofinancecurrentconsumption.EffectsonHouseholdConsumptiEquitypricesaffectcorporateinvestmentviaTobin’sq:Investmentincreaseswhenthemarketvalueofafirmrelativetoitsreplacementcostrises.Corporatebalancesheeteffect:ThenetworthofafirmaffectstheexternalfinancepremiumandthecostofcapitalChangesincollateralvaluesaffecteligibilityforbankloansandthusinvestment.Bankbalancesheeteffect:Banks’capitalpositionandlendingcapacitydeclineswhenthenetworthisadverselyaffectbydeclinesinassetprice

creditcrunch.EffectsonBusinessInvestmentEquitypricesaffectcorporate47AssetpricesExpectations/ConfidenceExternalFinancingCostBalanceSheets:InvestorsandBanksTobin’sqAssetPriceChannel:FinancialAcceleratorInvestmentOutputAspiralbetweenassetpricesandaggregatedemand47AssetpricesExpectations/ExTheExchangeRateChannelWhentheexchangerateisfloating,monetarypolicycouldhavesystematiceffectsontheexchangerate.Tightermonetarypolicyleadstoexchangerateappreciation,whichreducespricepressures:Aggregatedemand:appreciationreducesnetexportsAggregatesupply(cost):appreciationreducesdomesticcurrencyvalueofimportsTheExchangeRateChannelWhenPass-throughfromExchangeRatetoInflationPass-throughfromexchangeratestoimportpricesexhibitscross-sectionaldifferencesInemergingmarketsusuallyfasterthaninadvancedcountriesItdependsonpricesettingbehaviororconcernaboutmarketsharePass-througheffectscouldbeendogenousFortheU.S.,long-runpass-throughonly24-29%;forGermany40-100%;forJapan80-100%.ChoiandCook(2008,IMFWP/08/213)estimatepass-througheffectsusinganewKeynesianmodel.Theestimatedpass-througheffectisfilteringveryslowly.FortheU.S.,only7%oftheimporterswillchangetheirpricesinresponseineachquarteraftertheshock.Pass-throughfromExchangeRat50Ittakestimeforchangesinmonetarypolicyinstrumenttohavemaximumimpactonmacroeconomy.ChangeininstrumentMarketratesAssetpricesExpectations/confidenceExchangerateDomesticinflationarypressureInflation18-24months12-18monthsChangescanbeanticipatedLagsfortheMonetaryPolicytoTakeEffect50IttakestimeforchangesinLagsfortheMonetaryPolicytoTakeEffectTherefore,monetarypolicyneedstobepre-emptive.

Thisrequiresclearunderstandingofmacroeconomicstructure,correctidentificationoftheunderlyingshocks,accuratedatacollection,andreliableforecasting.Challengesfacedbypolicy-makersinrealtimearedauntingmodeluncertainty,parameteruncertainty,datauncertainty,etc.Theconductofmonetarypolicywillremainbothascienceandanart.LagsfortheMonetaryPolicytTheU.S.FederalReserve’sUnconventionalMonetaryPolicyTheU.S.FederalReserve’sUncU.S.MonetaryPolicyDuringtheCrisisOverviewoffinancialcrisisandrecessionFederalReserve’sPolicyResponseExtraordinaryprovisionofliquidityCutsinshort-terminterestratesCommunicationoffuturepolicyguidancePurchasesoflong-termdebtsecuritiesExcessreservesandinflationexpectationsExitstrategyoftheunconventionalmonetarypolicyU.S.MonetaryPolicyDuringthCreditBoomandHousingBubble:2000-2005Floodofinternationalcapital,lowinterestrates,andampleliquidityinducedacreditboomwithespeciallyrapidgrowthinresidentialborrowing.Investorsunderestimatedunderlyingcreditrisks.Theyweremisledbyunreliablecreditratingsandcomplicatedstructuredfinanceproducts.Inadequatefinancialsupervisionandregulation.CreditBoomandHousingBubbleCreditBoomandHousingBubble:2000-2005Creditboomwasreinforcedbyrisinghomeprices,lowdefaultrates,andalooseningofunderwritingstandards—especiallyonloanstobesecuritized.Creditboomandhousingbubble:2000-2005CreditBoomandHousingBubbleCreditBoomInflateswithHousingBubbleHousepricesincrease(Housingbubble)HomeequityrisesDelinquenciesfallCredittermsloosenHousingdemandrises(Creditboom)CreditBoomInflateswithHousIMF高級宏觀經(jīng)濟(jì)學(xué)研修班課程CT1405MMF-L03Moneta課件FinancialCrisisandRecessionU.S.housingbubblestartedtodeflatein2005-2006.Risingmortgagedelinquenciesinearly2007stunnedinvestors.Mortgage-backedsecurities(MBS)lostvalue,asdidotherasset-backedsecurities(ABS).Uncertaintyaboutthesizeandlocationofthesefinanciallossesinthefinancialsystemledtowithdrawalofliquidityandaclampdownoncredit.FinancialCrisisandRecessionFinancialCrisisandRecessionFinancialinstitutions/marketscameundertremendousstress.U.S.economyenteredrecessioninDecember2007.FinancialCrisisandRecessionAdverseFeedbackCycleinReverseHousepricesdecreases(Housingbust)HomeequityfallsDelinquenciesriseCredittermstightenHousingdemandfalls(Creditcrunch)AdverseFeedbackCycleinRevePercentagepoints,annualizedFailureofLehmanBrothers;AIG(Sep.15-16)G-7action,LehmanCDSsettlement(Oct.10)TAFestablished(Dec.12)TSLFestablished(Mar.11)BearStearnsbailout(Mar.17)Percentagepoints,annualizedFRealGrossDomesticProduct(GDP)QuarterlypercentchangeRealGrossDomesticProduct(GUnemploymentRateintheU.S.PercentUnemploymentRateintheU.S.TheFed’sPolicyResponsesExtraordinaryprovisionofliquidity“Lenderaslastresort”Liquidityinjectionfacilitiesandthe“stigmaproblem”Cutsinshort-terminterestratesForwardguidance:CommunicationsoverfuturemonetarypolicystancePurchasesoflong-termdebtsecuritiesTheFed’sPolicyResponsesExtrExtraordinarySupplyofLiquidityExtraordinarySupplyofLiquidShort-termRateCuttoAlmostZeroShort-termRateCuttoAlmostThenItwasConstrainedbyA“ZeroLowerBound”ThenItwasConstrainedbyA“PolicyOptionsAfterShortRatesHittheZeroLowerBound(ZLB)UnconventionalMonetaryPolicy(UMP)measures:Forwardguidance:CommunicationsoverfuturemonetarypolicystanceQuantitativeeasing:Purchasesoflong-termdebtsecuritiesPolicyOptionsAfterShortRatLong-terminterestratesaretheexpectedfutureshort-termratesplustermpremiums:Thereforeinprinciple,centralbankscanadjustthecurrentpolicyrate,ormarket’sexpectationsoffuturepolicyrate,ortermpremiums(liquidityandriskpremiums)toaffectlong-terminterestrates.

Pass-throughtoLong-termInterestRatesLong-terminterestratesaretWhenthepolicyratehitsthezerolowerbound(ZLB),acentralbankmaystillbeabletoaffectlong-terminterestratesandaggregatedemand:Throughchangingmarket’sexpectationsoffuturepolicyrate.Throughchangingtermpremiums.Pass-throughtoLong-termInterestRatesWhenthepolicyratehitstheTheFederalReserve’sForwardGuidanceCommunicatealong-termanchorforinflation

“Most[FOMC]participantsjudgedthatalonger-runPCEinflationrateof2percentwouldbeconsistentwiththedualmandate[ofmaximumemploymentandpricestability].”(2/18/09)Conditionallypromisefuturelowinterestrates: “TheCommittee...anticipatesthateconomicconditionsarelikelytowarrantexceptionallylowlevelsofthefederalfundsrateforanextendedperiod.”(3/18/09)TheFederalReserve’sForwardFOMCStatementonAugust9,2011:“Topromotetheongoingeconomicrecoveryandtohelpensurethatinflation,overtime,isatlevelsconsistentwithitsmandate,theCommitteedecidedtodaytokeepthetargetrangeforthefederalfundsrateat0to1/4percent.

TheCommitteecurrentlyanticipatesthateconomicconditions--includinglowratesofresourceutilizationandasubduedoutlookforinflationoverthemediumrun--arelikelytowarrantexceptionallylowlevelsforthefederalfundsrateatleastthroughmid-2013.”TheFederalReserve’sForwardGuidanceFOMCStatementonAugust9,20FOMCStatementonJanuary25,2012:“Tosupportastrongereconomicrecoveryandtohelpensurethatinflation,overtime,isatlevelsconsistentwiththedualmandate,theCommitteeexpectstomaintainahighlyaccommodativestanceformonetarypolicy.Inparticular,theCommitteedecidedtodaytokeepthetargetrangeforthefederalfundsrateat0to1/4percentandcurrentlyanticipatesthateconomicconditions--includinglowratesofresourceutilizationandasubduedoutlookforinflationoverthemediumrun--arelikelytowarrantexceptionallylowlevelsforthefederalfundsrateatleastthroughlate2014.”TheFederalReserve’sForwardGuidanceFOMCStatementonJanuary25,FOMCStatementonSeptember13,2012:“Tosupportcontinuedprogresstowardmaximumemploymentandpricestability,theCommitteeexpectsthatahighlyaccommodativestanceofmonetarypolicywillremainappropriateforaconsiderabletimeaftertheeconomicrecoverystrengthens.Inparticular,theCommitteealsodecidedtodaytokeepthetargetrangeforthefederalfundsrateat0to1/4percentandcurrentlyanticipatesthatexceptionallylowlevelsforthefederalfundsratearelikelytobewarrantedatleastthroughmid-2015.”TheFederalReserve’sForwardGuidanceFOMCStatementonSeptember13FOMCStatementonDecember12,2012:“Inparticular,theCommitteedecidedtokeepthetargetrangeforthefederalfundsrateat0to1/4percentandcurrentlyanticipatesthatthisexceptionallylowrangeforthefederalfundsratewillbeappropriateatleastaslongastheunemploymentrateremainsabove6-1/2percent,inflationbetweenoneandtwoyearsaheadisprojectedtobenomorethanahalfpercentagepointabovetheCommittee’s2percentlonger-rungoal,andlonger-terminflationexpectationscontinuetobewellanchored.”TheFederalReserve’sForwardGuidanceFOMCStatementonDecember12,TheFederalReserve’sForwardGuidanceStatementhelpsinformfinancialmarkets:Itlowersexpectationsoffutureshort-termratesandhencelowerslong-termrates.Anticipationoffuturelowratesisexplicitlydependentonfutureeconomicdata.TheFederalReserve’sForwardFOMCannouncementonNovember25,2008onthefirstpurchase“QE1”:“TheFederalReserveannouncedonTuesdaythatitwillinitiateaprogramtopurchasethedirectobligationsofhousing-relatedgovernment-sponsoredenterprises(GSEs)…Purchasesofupto$100billioninGSEdirectobligationsundertheprogram...Purchasesofupto$500billioninMBS...PurchasesofbothdirectobligationsandMBSareexpectedtotakeplaceoverseveralquarters.”LargeScaleAssetPurchases(LSAP)FOMCannouncementonNovemberF