How Much Can the Fed Really Influence the Economy?

first_imgSign up for DS News Daily The Best Markets For Residential Property Investors 2 days ago The weak April jobs report released by the Bureau of Labor Statistics last week has fueled speculation that a rate hike by the Fed in June is now off the table. But according to the president of one Fed bank, financial markets’ focus is in the wrong place if they are concentrating on what the Fed does with the short-term interest rates.Neel Kashkari, president of the Minneapolis Fed since November, has mostly focused on an initiative to end “too big to fail” since he took his post. On Monday, Kashkari spoke at the Economic Club of Minnesota and addressed monetary policy for the first time in his six months as president of the Minneapolis Fed.Kashkari said he believes the “current accommodative policy stance (keeping the federal funds target range at 0.25 to 0.5 percent) is appropriate” given the lack of notable price and wage pressures and the possibility of drawing more people back into the labor market. He also stated, however, “I think market participants are too focused on the Fed, and I am reluctant to draw even more attention to short-term monetary policy decisions, when attention should be focused on solutions to longer-term issues.”“But the truth is that central banks can’t influence many of the things that really matter to the long-term well-being of a society.”Neel Kashkari, Minneapolis Fed PresidentKashkari compared the market’s preoccupation with “every short-term move the Fed might make” to the Summer of the Shark in 2001, when on the surface it seemed that sharks were biting people more than usual. This prompted television crews to camp out at beaches waiting to catch the next bite on film. There was widespread speculation as to what caused the seemingly higher number of shark attacks, but in the end, it turned out that they were not biting people any more than usual; it was just a slow news summer.Neel Kashkari“Given all the attention market participants pay to every FOMC statement, one would think the Fed could control a lot,” Kashkari said. “But the truth is that central banks can’t influence many of the things that really matter to the long-term well-being of a society. We can’t influence trend productivity growth. We can’t influence competitiveness. We can’t influence educational performance.”Kashkari reminded the audience that central banks can “really do only three things”:Create a long-term stable monetary environmentRespond to an economic crisisInfluence short-term economic performanceKashkari noted that the legislative and executive branches of the government have a great deal of influence on the long-term trajectory of the economy, and that Congress determines how much public money is dedicated to educating the workforce. He noted, however, that despite the Fed’s lack of influence on the economy’s long-term trajectory, market participants seem to be focusing on the Fed and what move it will make next as far as interest rates. He speculated that the reason people are paying more attention to the Fed is because of the Fed’s increased transparency and because of fewer policy actions by Congress and the executive branch due to a lack of political consensus in Washington; hence, the “slow news summer” in the shark comparison.“The Federal Reserve has a role to play, but we shouldn’t be the only player nor the most important one,” Kashkari said.Click here to read Kaskhari’s complete speech. in Daily Dose, Featured, Government, News Data Provider Black Knight to Acquire Top of Mind 2 days ago The Week Ahead: Nearing the Forbearance Exit 2 days ago How Much Can the Fed Really Influence the Economy? May 9, 2016 1,175 Views Home / Daily Dose / How Much Can the Fed Really Influence the Economy? Data Provider Black Knight to Acquire Top of Mind 2 days ago Related Articles Brian Honea’s writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master’s degree from Amberton University in Garland. Servicers Navigate the Post-Pandemic World 2 days ago Demand Propels Home Prices Upward 2 days agocenter_img Demand Propels Home Prices Upward 2 days ago Tagged with: Federal Funds Target Rate Federal Reserve Neel Kashkari U.S. Economy  Print This Post About Author: Brian Honea Previous: The Effect of Stepups on HAMP vs. Proprietary Mods Next: How Does Cybersecurity Affect the Mortgage Industry? 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Internet of things: Mobile banking (of things)

first_imgThe Internet of Things (IoT) has gained a considerable amount of hype as the “Next Big Thing” to change the world as we know it. Applications of IoT are thought by some to be limited only by the human imagination. From simply controlling your home (e.g. – lights, thermostat, etc.) with a smartphone, to life saving medical and healthcare systems, IoT is pervasive and growing rapidly.The financial services industry has recently started experiencing the IoT disruption in the form of mobile banking. While mobile banking is seen as an incredible advancement in financial services, it may only be the tip of the iceberg for the Bank (Credit Union) of Things.In recently published whitepaper, The Bank of Things: How the Internet of Things will Transform Financial Services, Author Ian Webster of Accenture discusses what he refers to as ‘Customer 3.0.’ Much like I discussed in my last article, Why Attracting Millennials Requires Big Data/Analytics, Webster’s ‘Customer 3.0’ is “hyper-connected, highly informed, very demanding and spoilt for choice. They expect to be engaged as individuals, and on their terms — when, where and how they want.” This new information expectation is requiring banks/credit unions to think of innovative ways to transform their data into valuable assets that provide a better customer experience.Examples of IoT in Financial Services‘Customer 3.0’ is being conditioned to expect much more information in all areas of their lives with retail banking being no exception. IoT is still in its adolescence in the financial services industries but there are several practical example of IoT in banking that do not seem far-fetched.Consider the following example: Loans are a major source of revenue for financial institutions but with interest rates at historical lows, differentiating one loan from another is difficult. So how do you ensure someone uses your financial institution for their next loan? By being the first image a customer sees when deciding to make their next big purchase. With advanced geo-tracking using beacons (IoT technology), financial institutions can send out the most accurate and timely marketing alerts. continue reading » ShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblrlast_img read more