We should expect a third business cycle in succession in which the real federal funds rate reaches its trough well after the economy begins to recover.

In 2004 and 2005, long-term interest rates remained remarkably low despite improving economic conditions and rising short-term interest rates, a situation that former Fed Chairman Alan Greenspan dubbed a "conundrum." We document the extent and timing of this conundrum using two empirical...

This paper examines the impact of the stance of monetary policy on security returns. The two measures of the stance of monetary policy used, the federal funds rate and an index based on the changes in the discount rate, contain significant information that can be used to forecast expected stock...

Long-term interest rates tend to rise as monetary policymakers increase short-term interest rates. This relationship didn't hold, however, during the recent U.S. monetary policy tightening cycle. Between June 2004 and June 2006, the Federal Open Market Committee increased the federal funds rate...

Now that the Fed has started to bump up the federal funds rate, the explanation often heard for it is that the Fed is “tightening” monetary policy to keep economic growth in check. But sometimes the Fed needs to move rates just to keep policy from changing.

There has been a remarkable increase in the FOMC’s communication over the last decade. Perhaps the most dramatic change was the inclusion of language indicating the possible direction of future policy. One example is the now famous “considerable-period” language that was inserted in August...

This article was originally presented as a speech at the Ozark Chapter of the Society of Financial Service Professionals, Springfield, Missouri, October 6, 2004.