Study Data from Federal Reserve Bank Provide New Insights into Investment (Risk Management In Monetary Policymaking: the 1994-95 Fomc Tightening Episode): Investment

2025 JUL 08 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Investigators discuss new findings in Investment. According to news reporting from St. Louis, France, by NewsRx editors, the research stated, “The 1994-95 tightening episode was one of the most notable in the FOMC’s history because the FOMC raised the policy rate by 300 basis points in a year, despite headline and core CPI inflation trending lower prior to the beginning of tighter policy in February 1994. Although Chair Alan Greenspan publicly signaled the FOMC’s desire to normalize its policy rate prior to February 1994, the Federal Reserve’s actions nonetheless caught the Treasury market by surprise, triggering a sharp decline in long-term bond prices.”

Financial support for this research came from Research Division economists and research fellows.

The news correspondents obtained a quote from the research from Federal Reserve Bank, “Chair Greenspan and the FOMC were regularly surprised that inflation was not rising by more than the forecasts suggested during the episode. This article presents some evidence that the Greenbook forecast systematically, albeit modestly, overpredicted CPI inflation during the tightening period. Still, the success of the episode stemmed importantly from the decision by Greenspan and the FOMC to increase the policy rate to a level deemed restrictive for most of 1995.”

According to the news reporters, the research concluded: “The end result was the avoidance of a recession and an eventual slowing in inflation and inflation expectations.”

This research has been peer-reviewed.

For more information on this research see: Risk Management In Monetary Policymaking: the 1994-95 Fomc Tightening Episode. Federal Reserve Bank of St Louis Review, 2025;107(6):1-16. Federal Reserve Bank of St Louis Review can be contacted at: Federal Reserve Bank St Louis, Box 442, St Louis, MO 63166, USA.

Our news journalists report that additional information may be obtained by contacting Kevin L. Kliesen, Federal Reserve Bank, St. Louis, France.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.20955/r.2025.06. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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