Is the Federal Reserve's taper tightening the money supply?

Both former Fed Chairman Ben Bernanke and current Chairwoman Janet Yellen have been careful to reassure markets that they have not been trying to tighten money conditions by reducing monthly bond purchases by $10 billion at recent meetings. With its ongoing promises to keep interest rates near zero until well out into the future, the Fed thinks it is adding monetary stimulus.

But with short-term interest rates near zero for more than five years, it can be hard to tell.

In normal times, the stance of the Fed's monetary policy is easy to discern. When it wants to tighten, it raises rates. And when it thinks inflation and growth are running low, it lowers rates.

It hasn't had the option of lowering rates since its last meeting of 2008, when it hit the zero lower bound. Instead, it has relied on quantitative easing and extended forward guidance regarding future rates as alternatives.

But thanks to the economists Cynthia Wu and Dora Xia, it's possible to get a sense of where overnight interest rates would be if they weren't constrained by the zero lower bound. Wu and Xia created a model for reliably projecting rates based on the shape of the yield curve.

These projections allow them to construct a “shadow rate” for the overnight lending rate, that is, what the rate would be if it could go below zero.

Wu and Xia recently updated their data for January. They found that the “shadow” overnight rate was -2.4 percent in January, and falling:

This chart doesn't mean that monetary conditions are loose. But it does suggest that the Fed has been adding stimulus, not withdrawing it, over the course of the taper so far.

For the week ahead:

A number of heavyweight economic policymakers and analysts will assemble in Washington on Monday and Tuesday for a conference hosted by the National Association for Business Economics. Those scheduled to speak include former top Obama economic adviser Larry Summers, Congressional Budget Office Director Douglas Elmendorf, former Federal Reserve Chairman Alan Greenspan, Federal Deposit Insurance Corporation Vice Chairman Thomas Hoenig, Obama economic adviser Jason Furman, Federal Reserve governor Daniel Tarullo, and others.

On Wednesday, federal agencies will report on new-home sales for January. Sales plunged in December to 414,000 -- one of many indicators that came in weak for the month, raising questions about the resilience of the recovery.

Yellen will testify before the Senate Banking Committee on Thursday, to make up for a previously scheduled hearing required by law that was canceled because of a snowstorm in Washington.

And on Friday the Bureau of Economic Analysis will release the second estimate for economic growth in the last three months of 2013. The initial report said that the economy grew at a relatively strong 3.2 percent rate, but economists expect that number to be revised down slightly.