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12 06 2015 | by Victor Xing | Central Banks

What makes a FOMC meeting “live meeting?”

A “live meeting” refers to a meeting which the Federal Reserve may begin its long-anticipated policy normalization by raising interest rates.  In the past, it was commonly acknowledged that the central bank may announce policy changes at any of its scheduled meetings (each meeting being “live”), but with rates at zero lower bound for 7 years (Dec 2008 to present), meetings where rates may change is now an anomaly.
Another context to which this came about is rooted in the structure of Federal Open Market Committee meetings.  The FOMC ordinarily holds 8 meetings per calendar year (2010 had 10 meetings – 2 unscheduled), and out of the 8 meetings, only the “quarterly” meetings in March, June, September and December have scheduled press conferences.  Because rates had been near zero for so long, market participants were previously expecting the “historic liftoff” decision to only happen at a meeting with press conference to allow the FED Chair to better clarify policy decision and set expectation on subsequent policy changes (FED’s “rate path”).  The Federal Reserve had since setup a process to hold ad-hoc press conference calls, so all meetings can now have a press conference, even if previously unscheduled.  This is behind Chair Yellen’s comment that “every meeting that we have is a live meeting at which the Committee could make a policy decision.”
Below is the September 16-17 Meeting Press Conference.  The format is usually as follows:
  1. FED Chair opens with an economic overview and provides a summary of Federal Reserve policies outlined in the meeting Statement, which would be released 30 minutes prior
  2. Q&A: the Chair answers question from the press.  Members of the press in attendance are generally senior policy reporters from FT, Economist, Bloomberg, WSJ, Washington Post, Reuters, and so forth.  After awhile one would remember each of the reporter’s names, as well as their past articles and types of questions they like to ask – some journalists are quite good at this and would identify topics that the FED Chair may not have covered in her policy summary, and it is answers on these type of questions that would really move the market (new information)
live meeting - FOMC press conference
The following exchange happened during the December 2014 press conference, where Chair Yellen highlighted that all meetings are now “live” (although forward guidance at the time also allowed officials to exclude the next couple FOMC meetings in terms of rate hike).
MARTIN CRUTSINGER. Marty Crutsinger with the Associated Press. Given the what’s happening now with the transition with the Fed, there seems to be a pattern developing that the market expects big news to come when you have a press conference and no news to come when you don’t have one. But is that a good expectation? And is there any thought to starting to have a press conference at every meeting?
CHAIR YELLEN. So I would really like to discourage that expectation. Every meeting that we have is a live meeting at which the Committee could make a policy decision. And we will feel free to do so. So I would really like to strongly discourage the expectation that policy moves can only occur when there’s a scheduled press conference. And we have long had in place the ability to hold a press conference call, rather than an in-person press conference. And we did do so on a number of occasions in earlier years. So the Committee, clearly, would want to be able to explain its reasoning. As we begin the process of normalizing policy, every meeting is live. And if we were to decide at a meeting to begin to normalize policy, I expect we would hold a press conference call.
Original Quora article

Next article12 06 2015 | by Victor Xing | Other

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