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Recent FedSpeak Highlights

  • Janet L. Yellen From Reuters: The Fed is “not certain” the “surprising” inflation weakness will prove transitory, [Yellen] said at NYU Stern School of Business in New York. 

    [ November 21, 2017 ]

    Temporary factors likely explain the low U.S. inflation readings and prices should rebound next year, Federal Reserve Chair Janet Yellen said on Tuesday, though she added that she and her colleagues at the central bank are not necessarily convinced and the trend could prove more long-lasting.

    The Fed is “not certain” the “surprising” inflation weakness will prove transitory, she said at NYU Stern School of Business in New York. Yellen added she is “open minded” on what is behind the low-inflation conundrum.

  • Robert S. Kaplan For me, prudent risk management means some action to remove accommodation gradually and patiently… It’s not that you have see you are meeting both, then you move.

    [ November 16, 2017 ]

    Inflation is expected to rise toward the Fed’s goal, he said, and though structural pressures keeping it down are intensifying, “cyclical forces are building.”

    “For me, prudent risk management means some action to remove accommodation gradually and patiently,” he said, even if that means raising rates when the Fed has met only one of its two goals of full employment and 2-percent inflation. “It’s not that you have see you are meeting both, then you move.”

  • Loretta J. Mester I do think [the effectiveness of the Fed’s inflation target is] a very important thing that we should all be starting to think about… The Bank of Canada rethinks its framework every five years. It seems to me that’s not a bad thing.

    [ November 16, 2017 ]

    “I do think [the effectiveness of the Fed’s inflation target is] a very important thing that we should all be starting to think about,” Cleveland Fed President Loretta Mester told a monetary policy conference at the Cato Institute Thursday in Washington. “The Bank of Canada rethinks its framework every five years. It seems to me that’s not a bad thing.”

  • Eric Rosengren My own view is that it is quite likely that unemployment will fall below 4 percent, which is likely to increase pressures on inflation and asset prices. In my view, that suggests the need to continue to gradually remove monetary policy accommodation, which is quite consistent with market expectations of another increase in December.

    [ November 15, 2017 ]

    My own view is that it is quite likely that unemployment will fall below 4 percent, which is likely to increase pressures on inflation and asset prices. In my view, that suggests the need to continue to gradually remove monetary policy accommodation, which is quite consistent with market expectations of another increase in December.

  • Charles L. Evans In order to dispel the view that 2 percent is a ceiling, I feel our communications should be much clearer about our willingness to deliver on a symmetric inflation outcome. 

    [ November 15, 2017 ]

    By and large, central bankers are conservative types who view their most important task as preventing an outbreak of 1970s-style inflation. So perhaps then it’s not surprising that we as a group have not convincingly demonstrated to the public our commitment to a symmetric inflation target.

    Indeed, actual inflation outcomes in the U.S. have been far from symmetric.

    In order to dispel the view that 2 percent is a ceiling, I feel our communications should be much clearer about our willingness to deliver on a symmetric inflation outcome. This means our public commentary needs to acknowledge a much greater chance of inflation running at 2-1/2 percent in the coming years than I believe we have communicated in the past.

    I also worry that giving too much prominence to financial stability considerations in discussions of monetary policy could erode the public’s confidence in our commitment to our 2 percent inflation objective. Financial stability is obviously very important. But there are better tools than monetary policy for promoting it. In contrast, when it comes to meeting our inflation objective, monetary policy is the only game in town.

  • Raphael Bostic I’m going to stay open, but right now I’m pretty comfortable with the notion of us continuing to go on our pace toward a more balanced monetary policy [with a hike in December].

    [ November 14, 2017 ]

    When it comes to his support for boosting the Fed’s interest rate target in December, Mr. Bostic said after his speech that “I’m still in that place.” Asked if a rate rise is on the table, he responded “yes.” Mr. Bostic explained, “I’m going to stay open, but right now I’m pretty comfortable with the notion of us continuing to go on our pace toward a more balanced monetary policy.”

  • Charles L. Evans My aim today is not to argue for state-contingent price-level targeting… That may be a good way to go, but at this point, I just don't know. My point is that we should be planning for these inevitable future situations today.

    [ November 14, 2017 ]

    Evans championed [price-level targeting] policy in 2010 to deal with sagging inflation, but ultimately the Fed rejected such an "extreme" idea as too difficult to undertake during an economic crisis, Evans said on Tuesday.

    Now that economic times are calmer, Evans said, the Fed can study and analyze this and other approaches, and prepare the public for their possible use in the next severe downturn if the Fed cuts rates to zero and still needs more firepower to get the economy growing again. Bouts of zero interest rates are likely to become more common in the future as potential economic growth slows, Evans and other Fed policymakers believe.

    "My aim today is not to argue for state-contingent price-level targeting," Evans said on Tuesday. "That may be a good way to go, but at this point, I just don't know. My point is that we should be planning for these inevitable future situations today."

  • Janet L. Yellen Individual [Fed officials] should be explaining in their speeches, elaborating what's on the statement and explaining what we have agreed upon. We agreed that having done that, individuals can go out and explain their individual perspectives. I would say that guidance hasn't been totally faithfully followed.

    [ November 14, 2017 ]

    "Individual [Fed officials] should be explaining in their speeches, elaborating what's on the [Fed's decision] statement and explaining what we have agreed upon. We agreed that having done that, individuals can go out and explain their individual perspectives," she said.

    However, she added: "I would say that guidance hasn't been totally faithfully followed, although many of my colleagues do try to do that, and the press tends to pick up on differences, (which is) particularly difficult when we have an upcoming policy decision."

    Yellen admitted that it is hard to find a solution to this problem.

    "Probably we will never, given our structure and size, be able to deal with this totally effectively," Yellen told the audience.

  • Robert S. Kaplan From FT: Asked if he was willing to consider a rate rise at the Fed’s upcoming meeting, Mr Kaplan said: “Yes, I am actively considering appropriate next steps. As I should be.”

    [ November 14, 2017 ]

    From FT: Asked if he was willing to consider a rate rise at the Fed’s upcoming meeting, Mr Kaplan said: “Yes, I am actively considering appropriate next steps. As I should be.”

  • Patrick Harker I would like to avoid any inversion of the curve, so my goal is to remove accommodation in a way that we do not run the risk of inverting the yield curve.

    [ November 13, 2017 ]

    I think there are a lot of likely suspects [for the flattening of the yield curve]. One is just simply that other banks the European Central Bank, Bank of Japan, others continue to be highly accommodative, and that is one of the reasons we're seeing the long end flatten out. I am concerned about that, and that's why the pace of removal of accommodation, to me, has to be gradual… I would like to avoid any inversion of the curve, so my goal is to remove accommodation in a way that we do not run the risk of inverting the yield curve.

    We're heading toward, in the forecast horizon, a Fed funds rate around 3 percent or so. That's our forecast. But again, we'll take our time to get there, and we'll do it in a very prudent fashion so that we don't disrupt that markets and we run their risk of inverting the yield curve.

  • Patrick Harker I have penciled in right now, in my SEP, three increases for 2018, but... some of the underlying numbers, like wage growth, job openings and hires, if we saw that that wasn’t translating to higher prices -- our dual mandate is very clear, it’s stable prices.

    [ November 8, 2017 ]

    I have penciled in right now, in my SEP, three increases for 2018, but I will reassess that as the data comes in, referring to the Fed’s Summary of Economic Projections. Some of the underlying numbers, like wage growth, job openings and hires, if we saw that that wasn’t translating to higher prices -- our dual mandate is very clear, it’s stable prices.

  • Randall Quarles “I have come into this position thinking that ... changing the tenor of supervision will be the biggest part of what it is that I do,” Quarles said. “I think that a significant part of the Fed’s engagement of the firms is through supervision rather than regulation. I think that the regulatory part is probably the easier part.”

    [ November 6, 2017 ]

    “I have come into this position thinking that ... changing the tenor of supervision will be the biggest part of what it is that I do,” Quarles said. “I think that a significant part of the Fed’s engagement of the firms is through supervision rather than regulation. I think that the regulatory part is probably the easier part.”

  • Janet L. Yellen The bottom line is that we must recognize that our unconventional tools might have to be used again. If we are indeed living in a low-neutral-rate world, a significantly less severe economic downturn than the Great Recession might be sufficient to drive short-term interest rates back to their effective lower bound.

    [ October 20, 2017 ]

    Does this mean that it will take another Great Recession for our unconventional tools to be used again? Not necessarily. Recent studies suggest that the neutral level of the federal funds rate appears to be much lower than it was in previous decades. Indeed, most FOMC participants now assess the longer-run value of the neutral federal funds rate as only 2-3/4 percent or so, compared with around 4-1/4 percent just a few years ago. With a low neutral federal funds rate, there will typically be less scope for the FOMC to reduce short-term interest rates in response to an economic downturn, raising the possibility that we may need to resort again to enhanced forward rate guidance and asset purchases to provide needed accommodation.

    ...

    The bottom line is that we must recognize that our unconventional tools might have to be used again. If we are indeed living in a low-neutral-rate world, a significantly less severe economic downturn than the Great Recession might be sufficient to drive short-term interest rates back to their effective lower bound.

  • John Williams My own view is we want to continue this gradual pace of increase. One more rate increase in December and three more next year is a pretty good starting point.

    [ October 18, 2017 ]

    My own view is we want to continue this gradual pace of increase. One more rate increase in December and three more next year is a pretty good starting point. I am still data dependent, but that is my baseline view.

    My view is that the normal fed funds rate in the future is 2.5 percent, which is pretty low. That’s not a lot of rate increases to get to that normal level, but I do think we want to be moving gradually toward that over the next two years.

  • Patrick Harker From WSJ: Like most of his colleagues, Mr. Harker said he had penciled in one more rate increase this year in his economic forecast released following the September meeting. “I emphasize the word ‘pencil.”

    [ October 17, 2017 ]

    Like most of his colleagues, Mr. Harker said he had penciled in one more rate increase this year in his economic forecast released following the September meeting.

    “I emphasize the word ‘pencil,’” he said. “We have to see how inflation dynamics roll out over the next couple of months and we have to make sure that the process of ceasing reinvestment is, as we anticipate, not very disruptive to the market.”

    Mr. Harker said he has also penciled in three rate increases in 2018.

    “There’s no need to firmly commit” to raising rates again this year, Mr. Harker said. “We just have to see how it evolves.”

  • Patrick Harker On a national level, there’s very little slack left in the labor market.

    [ October 17, 2017 ]

    On a national level, there’s very little slack left in the labor market.

  • Janet L. Yellen My best guess is that these soft readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year. Most of my colleagues on the FOMC agree.

    [ October 17, 2017 ]

    Inflation readings over the past several months have been surprisingly soft, however, and the 12-month change in core PCE prices has fallen to 1.3 percent. The recent softness seems to have been exaggerated by what look like one-off reductions in some categories of prices, especially a large decline in quality-adjusted prices for wireless telephone services. More generally, it is common to see movements in inflation of a few tenths of a percentage point that are hard to explain, and such "surprises" should not really be surprising. My best guess is that these soft readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year. Most of my colleagues on the FOMC agree. In the latest Summary of Economic Projections, my colleagues and I project inflation to move higher next year and to reach 2 percent by 2019.

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/newsevents/speech/yellen20171015a.htm

    Venue:

    Group of 30 International Banking Seminar
  • James Bullard If the committee continues to raise rates that could turn into a policy mistake...I think inflation could drift lower instead of higher.

    [ October 13, 2017 ]

    “If you are going to have an inflation target you should defend it. If you say you are going to hit the inflation target then you should try to hit it and maintain credibility,” Bullard said.

    Persistent weakness this year in the Fed’s preferred measure of inflation means “we more or less lost all the progress that we made the last two years” toward the 2 percent goal, Bullard said. Continuing to raise interest rates in that environment “can send a signal to markets that the inflation target is not that important.”

    “This idea of throwing out the unpleasant number and finely chopping the price index, you get down to a set of prices that barely can be considered representative and I think that is inappropriate,” Bullard said. “Maybe this is temporary, maybe this will bounce back. What I say to that is you want to see evidence...This is going in the wrong direction. And it is not consistent with the stories that the committee has been telling,” of inflation reaching the Fed’s target in the “medium term.”

    “If the committee continues to raise rates that could turn into a policy mistake...I think inflation could drift lower instead of higher. I think a misperception about where rates need to be in this environment could possibly trigger recession if it was carried to an extreme.”

  • John Williams From Reuters:  San Francisco Federal Reserve Bank President John Williams on Wednesday said he expects the U.S. central bank to raise interest rates later this year, three times next year, and a little bit further in 2019.

    [ October 12, 2017 ]

    San Francisco Federal Reserve Bank President John Williams on Wednesday said he expects the U.S. central bank to raise interest rates later this year, three times next year, and a little bit further in 2019.

  • Eric Rosengren My guess is, if the data comes in as expected, it would be appropriate to raise rates in December.

    [ October 12, 2017 ]

    My guess is, if the data comes in as expected, it would be appropriate to raise rates in December.

    [Also,] three 2018 rate hikes sound “approximately right”.