Macroeconomics

Policy Tracker & Financial Conditions

Compare the Fed funds path to a Taylor proxy, monitor the real stance, and track balance sheet QT/QE swings.

Policy: Easy Financial Conditions: Loose

Fed Funds Rate

3.6%

Taylor proxy: 6.2%

Policy Gap (FFR - Taylor)

-2.6%

Positive = restrictive stance.

Real Federal Funds Rate

+0.4%

Core PCE adjusted.

Financial Conditions

-0.52

5y percentile: 22%

Policy vs Taylor Proxy

Real Policy Stance

Financial Conditions (NFCI)

Balance Sheet QT/QE Regimes

Methodology

How we evaluate policy and financial regimes

Policy signals are computed from FRED data the moment the Fed, BEA, or Chicago Fed releases an update. We compare the effective fed funds rate to a Taylor-style proxy and fold in the real policy rate plus NFCI percentiles.

Key FRED inputs

  • Policy rate — Effective federal funds rate averaged to a monthly frequency.
  • Core inflation — Core PCE inflation for the Taylor proxy and real-rate math.
  • Labor slack — Gap between the unemployment rate and CBO’s estimate of the natural rate (NAIRU).
  • Output gap — Difference between real GDP and the Fed’s estimate of potential GDP.
  • Financial conditions — Chicago Fed National Financial Conditions Index with a rolling percentile.
  • Balance sheet — Size of the Fed’s securities holdings to flag QT versus QE regimes.

Regime vocabulary

Policy (Easy / Neutral / Tight)
We label policy Tight when the fed funds rate is ≥ 100 bps above the Taylor proxy or the real FFR exceeds +0.5%. Easy is the opposite (gap ≤ −50 bps or real FFR < −0.5%), otherwise it is Neutral.
Financial Conditions (Loose / Neutral / Tight)
NFCI below the 30th percentile is Loose, above the 70th percentile is Tight, and everything in between is Neutral.

Additional context

  • The Taylor proxy adds 0.5 × core PCE gap, 0.5 × unemployment gap, and 0.5 × output gap to a 2% neutral rate.
  • Balance-sheet shading (QT or QE) is derived from the sign of the 4-week change in WALCL.