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Recent FedSpeak Highlights

  • William C. Dudley There is a bit of a, I would say, speculative mania around cryptocurrencies in terms of their valuations.

    [ February 22, 2018 ]

    “There is a bit of a, I would say, speculative mania around cryptocurrencies in terms of their valuations, which I view as pretty dangerous because I don’t really see what the actual true underlying value of some of these cryptocurrencies actually is in practice,” Mr. Dudley said.

    When it comes to the privately issued digital money, “it’s essentially what people think it’s worth, which seems to me somewhat dangerous,” Mr. Dudley said. “I’m a little bit skeptical we actually have this tremendous need for a cryptocurrency in the United States,” he added.

  • James Bullard The idea that we need to go 100 basis points in 2018, that seems like a lot to me… Everything would have to go just right.

    [ February 22, 2018 ]

    The idea that we need to go 100 basis points in 2018, that seems like a lot to me… Everything would have to go just right. The economy would have to surprise on the upside a bunch of times during the year. I'm not sure that's a good way to think about 2018.

    One thing I'm concerned about is if [there's] a bunch of hikes this year Fed policy will turn restrictive.  The neutral fed funds rates is pretty low.

  • Robert S. Kaplan The debt-financed tax cuts included in the legislation are likely to temporarily stimulate demand, with effects that will peak in 2018, and gradually fade in 2019 and 2020. Ultimately, we believe that growth will return back to trend.

    [ February 21, 2018 ]

    The debt-financed tax cuts included in the legislation are likely to temporarily stimulate demand, with effects that will peak in 2018, and gradually fade in 2019 and 2020. Ultimately, we believe that growth will return back to trend.

  • Patrick Harker I’ve penciled in two hikes for 2018. I use pencil because the data can change, and sometimes they don’t accurately point to future events. Like when they predict a Patriots' Super Bowl win. 

    [ February 21, 2018 ]

    I’ve penciled in two hikes for 2018. I use pencil because the data can change, and sometimes they don’t accurately point to future events. Like when they predict a Patriots' Super Bowl win. The Fed’s mantra is data dependent, and for now, the data continue to tell me two is the likely appropriate path.

  • Jerome H. Powell We will remain alert to any developing risks to financial stability.

    [ February 13, 2018 ]

    We will remain alert to any developing risks to financial stability.

  • Loretta J. Mester If the economy evolves as I anticipate, I believe further increases in interest rates will be appropriate this year and next year, at a pace similar to last year’s.

    [ February 13, 2018 ]

    If the economy evolves as I anticipate, I believe further increases in interest rates will be appropriate this year and next year, at a pace similar to last year’s.

  • Neel Kashkari I don’t delete tweets.

    [ February 8, 2018 ]

    @FreefallCapital @StockBoardAsset I don’t delete tweets.

  • William C. Dudley So far, I’d say this is small potatoes... The little decline that we’ve had in the equity market today has virtually no implications for the economic outlook.

    [ February 8, 2018 ]

    “So far, I’d say this is small potatoes,” Dudley said of recent market moves. “The little decline that we’ve had in the equity market today has virtually no implications for the economic outlook.”

  • Patrick Harker I‘m open to a March rate increase.

    [ February 8, 2018 ]

    “I‘m open to a March rate increase,” he told reporters after a speech delivered at a meeting of the National Association of College and University Business Officers. He added he has “lightly pencilled” in two rate hikes for 2018 and could see a third one depending whether inflation rises further and financial conditions remain loose.

  • Robert S. Kaplan We're facing wage pressures right now in the United States because of a tight labor market… I am less convinced that this will necessarily translate into higher prices because businesses have much less pricing power.

    [ February 7, 2018 ]

    "We're facing wage pressures right now in the United States because of a tight labor market," Kaplan, a dove and a non-voting member of the Fed's policy committee, told an audience in Frankfurt.

    "I am less convinced that this will necessarily translate into higher prices because businesses have much less pricing power," he added.

  • James Bullard This is the most predicted selloff of all time.

    [ February 6, 2018 ]

    “This is the most predicted selloff of all time because the markets have been up so much and they have had so many days in a row without meaningful down days,’’ Bullard told reporters after a speech Tuesday in Lexington, Kentucky. “So it is probably not surprising that something that has gone up 40 percent like the S&P tech sector would at some point have a selloff. Before there was a selloff, people said repeatedly some day this will sell off.”

    Bullard said he agreed with former Chair Janet Yellen’s analysis that stock prices were elevated.

    “They look high compared to historical norms, things like prices to trailing earnings,’’ he said.

    While the central bank is sometimes seen as stepping in to protect investors from steep market declines with a “Greenspan put’’ or a “Bernanke put’’ named after former chairs, Bullard said the Fed isn’t focused on helping markets so much as it reacts to the same data.

    “The stock market and the Fed are looking at the same thing, which is the future of the U.S. economy and the future of the global economy,’’ he said. “To the extent the markets see something that is different from what the Fed sees, it is important information. It is not so clear to me here that there is a story like that -- that the U.S. economy is not as robust as we thought it was.’’

  • Neel Kashkari Certainly valuation does seem on the high end, in terms of the stock market. We’ll see. Maybe this tax cut will lead to stronger earnings growth.

    [ February 5, 2018 ]

    “It seems like people are pricing in that the tax cut is going to have more of a near-term stimulative effect than maybe we appreciated a few months ago,” Kashkari said. “Certainly valuation does seem on the high end, in terms of the stock market. We’ll see. Maybe this tax cut will lead to stronger earnings growth.”

  • Janet L. Yellen Well, I don't want to say [asset prices are] too high.  But I do want to say high.

    [ February 4, 2018 ]

    As for whether Yellen's view that the stock market (which plummeted on Friday) has been too high in recent months: 

    "Well, I don't want to say too high.  But I do want to say high. Price-earnings ratios are near the high end of their historical ranges.  If you look at commercial real estate prices, they are quite high relative to rents.  Now, is that a bubble or is too high?  And there it's very hard to tell.  But it is a source of some concern that asset valuations are so high.

    More From:

    See Also:

    Source:

    https://www.cbsnews.com/news/janet-yellen-the-exit-interview/

    Venue:

    CBS 60 Minutes Interview
  • John Williams For the moment, I don’t see signs of an economy going into overdrive or a bubble about to burst,

    [ February 2, 2018 ]

    While the outlook is positive, it’s not so strong that it’s driving a sea change in my position. For the moment, I don’t see signs of an economy going into overdrive or a bubble about to burst, so I have not adjusted my views of appropriate monetary policy.

  • Robert S. Kaplan I’ve said that I think the base case for 2018 should be three removals of accommodation… it could be more than that, we’ll have to see.

    [ February 2, 2018 ]

    I’ve said that I think the base case for 2018 should be three removals of accommodation… it could be more than that, we’ll have to see.

  • Neel Kashkari The most important thing that I saw in a quick review of the jobs data is wage growth.

    [ February 2, 2018 ]

    "The most important thing that I saw in a quick review of the jobs data is wage growth," Kashkari said. "We've been waiting for wage growth. Everyone's been declaring we're at maximum employment. More Americans have been coming in, which is a really good thing. But there hasn't been much wage growth. This is one of the first signs that we're seeing wage growth finally starting to pick up."

  • John Williams I am not really worried about throwing us off the gradual rate (increases)… It could be a little bit quicker pace of increases, somewhat quicker, but I don’t see any kind of game-changing shift in strategy.

    [ January 19, 2018 ]

    “Right now my base case is that three rate increases for 2018 seems like a good starting point.” Williams told reporters after a talk at the Bay Area Council Economic Institute, adding, “That’s not something that’s locked in.”

    “I am not really worried about throwing us off the gradual rate (increases),” he said. “It could be a little bit quicker pace of increases, somewhat quicker, but I don’t see any kind of game-changing shift in strategy.”

  • William C. Dudley Historically the ability of the Fed to generate a soft landing when the unemployment rate has gone too low . . . the track record is poor.

    [ January 18, 2018 ]

    Historically the ability of the Fed to generate a soft landing when the unemployment rate has gone too low . . . the track record is poor. Pretty much in all the cases where the unemployment rate has been pushed up a little, it has actually ended up rising a lot. There are no examples historically of the unemployment rate moving up a half a per cent, or 1 per cent, or even 1.5 per cent. Once you have pushed up beyond a couple of tenths of a per cent, the next stop historically is there has been a full-blown recession. Now that does not mean that historical regularity necessarily has to be repeated, but I do think it is hard for the Fed to bring the economy back to a sustainable growth pace, sustainable labor market, if the economy really is too strong and the unemployment rate gets too low.  That is a risk to the longer-term outlook but it needs to be recognised. 

  • William C. Dudley The fact is that we have been tightening monetary policy over the last couple of years, yet financial conditions are actually easier today than when we began to start to tighten monetary policy.

    [ January 18, 2018 ]

    We will have to see how the economy evolves. There are arguments on both sides of the ledger. Inflation is still below our 2 per cent objective, so that argues for patience, on the other side the economy is growing at an above-trend pace, we are getting more fiscal stimulus so that should actually reinforce that trajectory, the labour market continues to tighten, financial conditions are very accommodative — that is something I put a fair amount of weight on. The fact is that we have been tightening monetary policy over the last couple of years, yet financial conditions are actually easier today than when we began to start to tighten monetary policy.

    It all suggests that the forecast that the FOMC wrote down in December, in the December summary of economic projections — where the median was three rate hikes in 2018 seems a very reasonable type of forecast . . . It could be more. We could do a little bit more, or could do a little bit less. Remember all these are forecasts, they are not pre-commitments. Sometimes people take the SEPs I think a bit too literally. They are just what we think is likely at that particularly point of time. If the economy changes of course we will change our forecasts.

    In response to a question about whether the Fed would raise rates three times in 2018.

  • William C. Dudley I don’t think there is any signal at all to take today [from the flat yield curve] in terms of the probability of a near-term recession.

    [ January 18, 2018 ]

    The yield curve is flatter than normal but there are good reasons why it is flatter than normal. The most obvious one is that we have QE still ongoing in Japan and Europe and the Fed still has a very elevated balance sheet relative to where we are actually headed in the medium to longer term. So bond term premia are unusually depressed. So think about the path you expect of short term rates in the future and ask yourself how much additional compensation for the risk of holding a bond you want to take. Right now by the measures we have bond term premia are about zero. That means the yield curve, everything else equal, is going to be flatter today than it would typically in prior environments when the term premium was much much larger. Historically the term premium, the spread between say three month treasury bills and 10-year treasury notes, has been about 100 basis points in terms of that term premium. Today the term premium is about zero. That accounts for pretty much all of the fact that the yield curve is flatter than normal can be explained just by the bond term premium.

    I would be much more concerned about the yield curve if I thought that the yield curve was flat because people thought short-term rates were high and monetary policy was tight. The reason why . . . an inverted yield curve has historically been a pretty good predictor of recession is typically the yield curve becomes inverted and people think short-term rates are high relative to what they are going to be in the future because monetary policy is tight. That turns out to be correct, and the tightness of monetary policy generates an economic downturn and so the yield curve essentially forecasts that outcome. In the current environment the yield curve is not inverted, it is flatter than normal mainly because term premia are unusually depressed. Market participants think short-term rates are low relative to what they are going to be in the future. I don’t think there is any signal at all to take today in terms of the probability of a near-term recession.