monetary policy

1. Gavyn Davies: The separation principle drives the Fed towards tapering: “A new ‘separation principle’ seems to be emerging, and it explains why the FOMC seems eager to begin winding down its asset purchases in the near future, while relying even more heavily than before on ‘lower for longer’ guidance on forward short rates. This could have important ramifications for markets…. The separation principle was spelled out more clearly than ever before in Ben Bernanke’s speech on communications policy…. Bernanke’s core point is that the Fed’s reading of monetary conditions now distinguishes sharply between two distinct factors, which are the expected forward path for short rates, and the term premium built into long term bond yields. Asset purchases by the central bank are intended to affect the second of these factors, the term premium, but are not intended to give any signal to the markets about the Fed’s willingness to keep short rates at zero for a prolonged period ahead…”
   
   (via DeLong)

Evan Soltas Says That Swiss Monetary Policy Is in Need of More Attention: Monday Focus (December 30, 2013) by DeLong