Federal Reserve Charts: Monitor These Charts Weekly if You Want to Get an Early Warning of Problems Ahead.
Here are the Federal Reserve charts that I regard as highly useful for predicting the next phase of the business cycle. To view any chart, click on its title.
In my department on Federal Reserve Policy, I comment on these charts, plus other materials issued by the Federal Reserve System and by FED-watchers. This department is in FOR MEMBERS ONLY.
To understand the Federal Reserve System, begin with this video:
The much-publicized rate, the Federal Funds rate, is in fact a publicly stated target rate. The real Federal Funds rate is the rate at which banks lend to each other overnight. The free market sets this rate, and it is rarely quoted or even mentioned. What gets quoted is the Federal Open Market Committee's target rate.
When commercial banks have legally excess reserves, they have no need to borrow overnight. That has been the case ever since December 2008, when the Federal Reserve began paying interest on excess reserves. Thus, the FedFunds rate has only one purpose today: to serve as a smokescreen for Federal Reserve announcements. It has a political purpose, but it has no economic purpose.
To see the recent actual daily FedFunds rates, see this page:
To achieve this rate, the Federal Open Market Committee, on behalf of the Federal Reserve System, buys or sells securities. It uses about 20 large firms to execute these trades. The list is here:
I prefer the median consumer price index, published by the Federal Reserve Bank of Cleveland. It is less volatile than the CPI. To see a chart of Median Consumer Price Index and the regular CPI, click here:
For definitions of the monetary aggregates, click here:
Federal Reserve Balance Sheet.
Excess Reserves of Commercial Banks [No longer reported -- incredible!]
Of the more widely reported monetary statistics in the financial press, M1 provides by far the best indication of future prices. Here is a chart of its growth, 1975-present.
Offsetting M1 (usually) is the M1 money multiplier.
If you want to forecast wrong and lots of lose money, pay close attention to M3. Assume that it accurately forecasts prices.... keep reading