wricaplogo

Keyword Search

RETURN

Categories

Recent FedSpeak Highlights

  • Janet L. Yellen As I noted earlier, the economic outlook is always subject to considerable uncertainty, and monetary policy is not on a preset course... In this regard, as we noted in the FOMC statement last month, inflation continues to run below our 2 percent objective and has declined recently; the Committee will be monitoring inflation developments closely in the months ahead.

    [ July 12, 2017 ]

    As I noted earlier, the economic outlook is always subject to considerable uncertainty, and monetary policy is not on a preset course. FOMC participants will adjust their assessments of the appropriate path for the federal funds rate in response to changes to their economic outlooks and to their judgments of the associated risks as informed by incoming data. In this regard, as we noted in the FOMC statement last month, inflation continues to run below our 2 percent objective and has declined recently; the Committee will be monitoring inflation developments closely in the months ahead.

  • Janet L. Yellen I try not to opine on the level of asset prices, although our report notes that valuations, generally, are toward the top of their historical ranges. What I try to think about is, if there are adjustments in asset prices, what consequences would they have on our financial system, in our economy.  And, in that context, look for evidence that searching asset prices might be leading to imprudent borrowing, a build up in leverage in the economy that would be dangerous if the prices were to unwind. And we're not seeing that so ...  financial stability risks, at this point, [appear] moderate.

    [ July 12, 2017 ]

    In looking at asset prices and valuations, we try not to opine on whether they are correct or they're not correct. But as you asked what the potential spillovers or impacts on financial stability could be of asset price revaluations, my assessment of that is that, as asset prices have moved up, we have not seen a substantial increase in borrowing based on those asset price movements. We have a financial system, a banking system that's well-capitalized and strong, and I believe it's resilient. 

    [And later...]

    I try not to opine on the level of asset prices, although our report notes that valuations, generally, are toward the top of their historical ranges. What I try to think about is, if there are adjustments in asset prices, what consequences would they have on our financial system, in our economy.  And, in that context, look for evidence that searching asset prices might be leading to imprudent borrowing, a build up in leverage in the economy that would be dangerous if the prices were to unwind. And we're not seeing that so ... [we judge that] financial stability risks, at this point, are moderate.

  • Lael Brainard I consider normalization of the federal funds rate to be well under way. If the data continue to confirm a strong labor market and firming economic activity, I believe it would be appropriate soon to commence the gradual and predictable process of allowing the balance sheet to run off.

    [ July 11, 2017 ]

    In light of recent policy moves, I consider normalization of the federal funds rate to be well under way. If the data continue to confirm a strong labor market and firming economic activity, I believe it would be appropriate soon to commence the gradual and predictable process of allowing the balance sheet to run off.

    Once that process begins, I will want to assess the inflation process closely before making a determination on further adjustments to the federal funds rate in light of the recent softness in core PCE (personal consumption expenditures) inflation. In my view, the neutral level of the federal funds rate is likely to remain close to zero in real terms over the medium term. If that is the case, we would not have much more additional work to do on moving to a neutral stance. I will want to monitor inflation developments carefully, and to move cautiously on further increases in the federal funds rate, so as to help guide inflation back up around our symmetric target.

  • Patrick Harker Let’s start the process of ceasing reinvestment. Let’s see how the market reacts to that, and then consider the third rate increase this year—whether that occurs or not.

    [ July 11, 2017 ]

    “Let’s start the process of ceasing reinvestment,” he said. “Let’s see how the market reacts to that, and then consider the third rate increase this year—whether that occurs or not.”

    Mr. Harker also said the exact timing of the central bank’s balance-sheet wind-down hasn’t been decided, but he “fully expects” it to start this year.

  • Loretta J. Mester I don’t think there’s anything, like, fundamental that says you couldn’t do both [asset sales and rate hikes] at the same time.

    [ July 6, 2017 ]

    I don’t think there’s anything, like, fundamental that says you couldn’t do both [asset sales and rate hikes] at the same time, alright? So really what we do with our funds rate path depends on what the economy is doing and how we see the outlook, etc. The balance sheet, again, because the change in the reinvestment policy is such a gradual one (other than the signaling effect that it might have — which we’re hoping that the communication is handling) there isn’t any reason not to start that early, just because it’s a very slow reduction in the size of the balance sheet. And to get the balance sheet down significantly it’s going to take several years. I mean, it’s not like something that’ll change overnight.

    So again, that’s sort of in the background, right? It’s not really an active, what I would say, policy tool at this point. The idea was set it and forget it—you know, like that old Ronco ad. You know, right? You just sort of do it, set it, let it go in the background. And then our main policy tool, of course, is going to be the short-term interest rate. And that’s the way I view it. And so could we do both at the same time? Sure. It depends on what the economy is doing.

  • James Bullard I think it’s more prudent to announce a balance-sheet adjustment at a press conference meeting. So September is more likely [than July].

    [ June 29, 2017 ]

    I think it’s more prudent to announce a balance-sheet adjustment at a press conference meeting. So September is more likely [than July].

  • Stanley Fischer The increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites

    [ June 27, 2017 ]

    The increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites, although this shift has not yet led to a pickup in the pace of borrowing or a sizable rise in leverage at financial institutions.

    The general rise in valuation pressures may be partly explained by a generally brighter economic outlook, but there are signs that risk appetite increased as well. For example, estimates of equity and bond risk premiums are at the lower end of their historical distributions, and, relative to some non-price-based measures of uncertainty, the implied volatility index VIX is particularly subdued. So far, the evidently high risk appetite has not lead to increased leverage across the financial system, but close monitoring is warranted.

  • Patrick Harker I’m sticking to my outlook that we’re on the right path, but I’m adjusting my view slightly on meeting our inflation goal from the end of 2017 to the beginning of 2018.

    [ June 27, 2017 ]

    I’m sticking to my outlook that we’re on the right path, but I’m adjusting my view slightly on meeting our inflation goal from the end of 2017 to the beginning of 2018. This is the advanced economic practice of “hedging one’s bets.”

  • Jerome H. Powell I am confident the broad Treasuries repo rate, which the Federal Reserve Bank of New York has proposed publishing in cooperation with the Office of Financial Research, is based on a deep and actively traded market and will be highly robust.

    [ June 26, 2017 ]

    And finally, I would also like to note that work continues to address the risks identified with existing reference rates. Just last week, the Alternative Reference Rates Committee (ARRC) selected a new rate suitable for use with new derivative contracts. I am confident the broad Treasuries repo rate, which the Federal Reserve Bank of New York has proposed publishing in cooperation with the Office of Financial Research, is based on a deep and actively traded market and will be highly robust. With this choice, the ARRC has taken another step in addressing the risks involved with the LIBOR.

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/newsevents/speech/powell20170626a.htm

    Venue:

    Salzburg Global Seminar
  • William C. Dudley When financial conditions ease, as has been the case recently, this can provide additional impetus for the decision to continue to remove monetary policy accommodation.

    [ June 25, 2017 ]

    "Monetary policymakers need to take the evolution of financial conditions into consideration," Federal Reserve Bank of New York president and CEO William Dudley, a permanent voter on U.S. interest rates and a close ally of Fed Chair Janet Yellen, said on a closed-to-the-press panel on Sunday.

    "When financial conditions ease, as has been the case recently, this can provide additional impetus for the decision to continue to remove monetary policy accommodation," he said according to prepared remarks published by the New York Fed.

  • Loretta J. Mester We don’t want to undermine credibility on the inflation target, but I think people react too much to one or two data reports.

    [ June 23, 2017 ]

    We don’t want to undermine credibility on the inflation target, but I think people react too much to one or two data reports.

  • James Bullard The trajectory that the committee has laid out seems to me to be inappropriate given the situation that we’re in.

    [ June 22, 2017 ]

    Last week’s rate increase is “not such a big problem,” Mr. Bullard said in an interview Wednesday. But the projection to raise the federal-funds rate to 3% over the next 2½ years “is unnecessarily aggressive,” he said. “The trajectory that the committee has laid out seems to me to be inappropriate given the situation that we’re in.”

  • Robert S. Kaplan I think there's a point that if the 10-year Treasury rate stays at the level it's at, we've got to be very careful about how we remove accommodation.

    [ June 20, 2017 ]

    I think there's a point that if the 10-year Treasury rate stays at the level it's at, we've got to be very careful about how we remove accommodation.

  • Charles L. Evans We have to assure the public that we recognize the new low-inflation environment and that we are not overly conservative central bankers who see our inflation target as a ceiling.

    [ June 19, 2017 ]

    I view slow removal of accommodation as necessary support to symmetrically achieving our 2 percent inflation goal in a timely fashion. We have to assure the public that we recognize the new low-inflation environment and that we are not overly conservative central bankers who see our inflation target as a ceiling.

  • William C. Dudley Generally, if you sort of asked me would I sign up for a 4.3 percent unemployment rate and inflation running about 1 1/2 percent, the answer is:  absolutely.

    [ June 19, 2017 ]

    "I am very confident" that economic expansion "has quite a long ways to go," Dudley said, adding he expected wage growth to rise to about 3 percent over the next year or two.

    ...

    "Generally, if you sort of asked me would I sign up for a 4.3 percent unemployment rate and inflation running about 1 1/2 percent, the answer is:  absolutely."

  • Robert S. Kaplan We should be very careful about raising rates and we should do it patiently and carefully.

    [ June 16, 2017 ]

    The Federal Reserve should be cautious about any further interest-rate hikes, Dallas Federal Reserve President Robert Kaplan said on Friday, just two days after he voted with the majority of his colleagues to raise rates for the second time this year.

    "We should be very careful about raising rates and we should do it patiently and carefully," Kaplan said at a meeting of the Park Cities Rotary Club in Dallas, adding that he will need to see improvements in inflation, which has weakened in recent months.

  • Jerome H. Powell If the economy continues broadly on the path it's on, I can see a couple more rate increases this year which would be a total of three.

    [ June 1, 2017 ]

    If the economy continues broadly on the path it's on, I can see a couple more rate increases this year which would be a total of three.

  • Lael Brainard With the federal funds rate projected to be in the range that is midway to the Committee's projection of the long-run value of the federal funds rate later this year, I would consider it reasonable to assess that this threshold will have been attained before too long.

    [ May 30, 2017 ]

    Consideration that normalization of the federal funds rate is well underway was the criterion the Committee adopted in its December 2015 decision to continue to reinvest principal payments. In my view, that "well under way" standard has served an important purpose. With asymmetry in the scope for conventional monetary policy to respond to shocks, maintaining reinvestments provided an important benefit by enabling the federal funds rate to rise more quickly than would have been possible with a shrinking balance sheet and sooner reach a level that allows for reductions if conditions deteriorate. This approach has ensured that our most proven tool, the federal funds rate, will have reached a level at which it can be cut if needed to buffer adverse shocks, thus helping to guard against the asymmetric risks associated with the effective lower bound. With the federal funds rate projected to be in the range that is midway to the Committee's projection of the long-run value of the federal funds rate later this year, I would consider it reasonable to assess that this threshold will have been attained before too long.

    ...

    I favor an approach that would gradually and predictably increase the maximum amount of securities the market will be required to absorb each month, while avoiding spikes. Thus, in an abundance of caution, I prefer to cap monthly redemptions at a pace that gradually increases over a fixed period. In addition, I would be inclined to follow a similar approach in managing the reduction of the holdings of Treasury securities and mortgage-backed securities (MBS), calibrated according to their particular characteristics.

    ...

    Over time, the gradual reduction in our balance sheet should result in a gradual decline in reserves to a longer-run level that is well below today's level but likely somewhat higher than in the pre-crisis regime. It is difficult to know in advance with any precision how low reserves can be allowed to drop. That minimum level will depend on the structural demand for reserves and the short-term variability in the demand for and supply of reserves. During the process of balance sheet normalization, I favor an approach of monitoring money markets carefully to gauge the appropriate longer-run level of reserves consistent with efficient and effective policy implementation.

    Finally, while subordination of the balance sheet to the federal funds rate should be our baseline policy, in my view, there may be circumstances when we may need to rely on the balance sheet more actively. During the period when the balance sheet is running down, if the economy encounters significant adverse shocks, it may be appropriate to commence the reinvestment of principal payments again in order to preserve conventional policy space.

     

     

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/newsevents/speech/brainard20170530a.htm

    Venue:

    New York Association for Business Economics
  • Robert S. Kaplan I don't want to put a specific number on [the eventual size of the balance sheet]. If somebody says in the $2 [trillion]s, that sounds about right to me.

    [ May 30, 2017 ]

    Kaplan said the balance sheet should be "substantially less" than it is today but conceded that it likely will remain above $2 trillion.

    "I don't want to put a specific number on it. If somebody says in the 2s, that sounds about right to me," he said.

  • John Williams I want [balance sheet reduction] to be predictable, well understood, gradual -- not super gradual, or uber-gradual, but gradual over time -- but also to be fundamentally on autopilot.

    [ May 26, 2017 ]

    I want [balance sheet reduction] to be predictable, well understood, gradual -- not super gradual, or uber-gradual, but gradual over time -- but also to be fundamentally on autopilot.