We extend Ruge-Murcia (2003, 2004) to weigh inflation and output and show that empirical evidence supports an asymmetric preference hypothesis for output. We also find evidence that the monetary authority targets potential output in parallel to Barro and Gordon (1983).

The influence of the Fed's actions on equity prices has been a source of significant speculation in recent years. This paper uses a well-regarded measure for the “fair” value of interest rates to measure the degree to which the Fed is influencing interest rates, and then relates that level...