This year’s annual report examines a project the Fed is spearheading to improve the U.S. payment system. The essay is written by St. Louis Fed First Vice President David Sapenaro, who recently completed his responsibilities as the project’s interim payments strategy director.View Publication
The St. Louis Fed Financial Stress Index (STLFSI) fell to a record low for the third consecutive week. For the week ending June 27, 2014, the STLFSI measured -1.369, down from the previous week’s revised value of -1.340. The STLFSI has been below zero for 130 consecutive weeks.
Over the past week, nine of the 18 indicators contributed negatively to the weekly change in the STLFSI, which was unchanged from the previous two weeks. The largest negative contribution was made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo), followed by the expected inflation rate over the next 10 years (BIR_10yr). Five indicators contributed positively to the change in the STLFSI over the past week—one less than the previous week. The largest positive contribution was made by the Chicago Board Options Exchange Market Volatility Index (VIX), followed by the corporate credit risk spread (Corp_CRS).
Over the past 52 weeks, 14 of the 18 indicators contributed negatively to the change in the STLFSI, down from 15 negative contributions last week. Similarly, only one indicator contributed positively to the index, down from two last week. The largest negative contribution over the past year was made by the Mlynch_BMVI_1mo, followed by the VIX. The only positive contribution was made by the Treasury yield curve (YieldCurve_10yr3mo). The STLFSI was below its year-earlier level for the seventh consecutive week.
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.