Research traces inflation targeting's evolution from 1990s New Zealand to global dominance, showing crisis resilience and anchored expectations. Advanced behavioral modeling finds infinitely long averaging periods remain optimal for the Federal Reserve's framework despite cognitive limitations.

Recent research reveals that central bank communications influence markets and the economy through multiple channels: information effects from the Fed’s insights are robust and drive key financial and macroeconomic outcomes, while permanent monetary shocks and market misperceptions also play significant, though more limited, roles in shaping interest rates and inflation dynamics.

Recent reviews of unconventional monetary policy in both the euro area and the United States highlight that while tools like negative interest rates, asset purchases, and forward guidance helped stabilize economies at the effective lower bound, they also brought significant unintended costs and design challenges.

Can either financial conditions guidance or scenario-based forecasting improve central bank communication  effectiveness? Two new interesting papers address these issues.

This newsletter highlights recent research showing how a “positive neutral” approach to the countercyclical capital buffer can enhance banking sector resilience and ensure that sufficient releasable capital is available before risks escalate.

Two recent papers reject the “see-through” approach of monetary policy but they differ in focus: one emphasizes inflation-output trade-offs, whereas the other stresses how tariff revenues create fiscal effects that complicate policy coordination.

Recent research shows that after decades of decline, the natural rate of interest appears to be rising due to shifting market expectations, fading demographic and global headwinds, and persistent fiscal pressures—suggesting the era of ultra-low rates may be over.

Two new papers, the first provides a comprehensive framework for understanding central banks’ inflation-control tools, and the second examines how structural shifts and political economy forces are reshaping long-term inflation dynamics.

Two recent studies shed light on central bank independence (CBI) from complementary perspectives. The first explores how public understanding and partisan alignment influence support for CBI. The second introduces an extended dataset tracking CBI reforms across 192 countries from 1970 to 2023, highlighting significant regional and temporal variations.

Recent research examines how macroeconomic modelling at the Fed has evolved during the last fifty years as well as how agent-based models have emerged as effective complementary tools for central banks.