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Recent FedSpeak Highlights

  • Raphael Bostic I began the year with a decided upside tilt to my risk profile for growth, reflecting business optimism following the passage of tax reform. However, that optimism has almost completely faded among my contacts, replaced by concerns about trade policy and tariffs.

    [ June 18, 2018 ]

    I began the year with a decided upside tilt to my risk profile for growth, reflecting business optimism following the passage of tax reform. However, that optimism has almost completely faded among my contacts, replaced by concerns about trade policy and tariffs. Perceived uncertainty has risen markedly. Projects already under way are continuing, but I get the sense that the bar for new investment is currently quite high. "Risk off" behavior appears to be the dominant sentiment among my contacts. In response, I've shifted the risks to my growth outlook to balanced.

  • Robert S. Kaplan For me, my base case is still three [rate hikes] for this year… Having said that, I’m very open-minded about, when we get to the fall, being open to a fourth.

    [ June 15, 2018 ]

    “For me, my base case is still three [rate hikes] for this year,” he told reporters after the luncheon. “Having said that, I’m very open-minded about, when we get to the fall, being open to a fourth.”

    Mr. Kaplan added there is no “magical” formula for the correct amount of rate increases that should be done the year. “I think the key is that we’re gradually moving toward a neutral stance.”

  • Jerome H. Powell I want to point out that having twice as many press conferences does not signal anything about the timing or pace of future interest-rate changes. This change is only about improving communications. My FOMC colleagues and I will also continue to issue our economic projections on the existing quarterly schedule. 

    [ June 13, 2018 ]

    As Chairman I hope to foster a public conversation about what the Fed is doing to support a strong and resilient economy. And one practical step in doing so is to have a press conference like this after every one of our scheduled FOMC meetings -- and we're going to do that beginning in January. That will give us more opportunities to explain our actions and to answer your questions.

    I want to point out that having twice as many press conferences does not signal anything about the timing or pace of future interest-rate changes. This change is only about improving communications. My FOMC colleagues and I will also continue to issue our economic projections on the existing quarterly schedule.

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20180613.pdf

    Venue:

    FOMC Chairman Post-Meeting Press Briefing
  • Jerome H. Powell We also made some changes to our policy statement, reflecting that policy normalization is proceeding broadly as we have expected. None of these changes signals a change in our policy views.  

    [ June 13, 2018 ]

    We also made some changes to our policy statement, reflecting that policy normalization is proceeding broadly as we have expected. None of these changes signals a change in our policy views.

    For example, we removed the language stating that, "the federal funds rate is likely to remain for some time below levels that are expected to prevail in the longer run. Since we introduced that language a few years ago, the economy has strengthened and the committee has raised the federal funds rate from near zero to 1.75 to two percent.

    As we continue to note in our statement, we expect to make further gradual increases in that rate. As a result, if the economy evolves broadly as we anticipate, the federal funds rate will, over the next year or so, move well within the range of estimates of the normal long run level.

    Therefore, we thought that now is an appropriate time to remove this forward guidance from our policy statement. We continued to believe that a gradual approach for increasing the federal funds rate will best promote a sustained expansion of economic activity, strong labor market conditions, and inflation near our symmetric two percent goal. 

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20180613.pdf

    Venue:

    FOMC Chairman Post-Meeting Press Briefing
  • Jerome H. Powell Our program for reducing our balance sheet, which began in October, is proceeding smoothly.  Barring a material and unexpected weakening in the outlook, this program will proceed on schedule, and our balance sheet will continue to shrink. 

    [ June 13, 2018 ]

    [O]ur program for reducing our balance sheet, which began in October, is proceeding smoothly. Barring a material and unexpected weakening in the outlook, this program will proceed on schedule, and our balance sheet will continue to shrink. 

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20180613.pdf

    Venue:

    FOMC Chairman Post-Meeting Press Briefing
  • Jerome H. Powell The recent inflation data have been encouraging but after many years of inflation below our objective we do not want to declare victory. We want to ensure that inflation remains near our symmetric two percent longer run goal on a sustained basis. 

    [ June 13, 2018 ]

    The recent inflation data have been encouraging but after many years of inflation below our objective we do not want to declare victory. We want to ensure that inflation remains near our symmetric two percent longer run goal on a sustained basis.  As we note in our statement of longer run goals and monetary policy strategy, the committee would be concerned if inflation were running persistently above or below our two percent objective. 

    ... 

  • Jerome H. Powell You asked about price level targeting and that sort of thing... This is an idea that's been written about for many years. It's not something that the committee has looked at seriously. I imagine we will be having discussions about it. But it's not something that we have on the calendar right now.

    [ June 13, 2018 ]

    You asked about price level targeting and that sort of thing. You know, there are some ideas that sort of take cognizance of the fact that rates are lower; we're near the zero lower bound. And that could put downward pressure on inflation expectations, if we're going to be down near the zero lower bound. And therefore undermine the credibility of the 2 percent inflation objective.

    So the idea is to have kind of a makeup. If you're below target for a while, you have a time of being above target. And the idea is to enhance the credibility of that 2 percent target.

    This is an idea that's been written about for many years. It's not something that the committee has looked at seriously. I imagine we will be having discussions about it. But not something that we have on the calendar right now. 

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20180613.pdf

    Venue:

    FOMC Chairman Post-Meeting Press Briefing
  • John Williams From Reuters: If the U.S. economy stays strong and inflation remains at or somewhat above the Fed’s 2 percent goal, [Williams] added, “that could mean that interest rates go above neutral for a period of time.”

    [ June 1, 2018 ]

    From Reuters: If the U.S. economy stays strong and inflation remains at or somewhat above the Fed’s 2 percent goal, [Williams] added, “that could mean that interest rates go above neutral for a period of time.”

    “I don’t view our policy path as just getting to neutral and saying, ‘okay we’re done’”

  • Loretta J. Mester Am I comfortable with seeing a couple of numbers above 2%? Yes. I was comfortable with seeing numbers below 2% as long as I thought things were moving in the right direction and we were moving inflation up and our policy stance was consistent with that outlook.

    [ May 31, 2018 ]

    I think if you look at the strategy document that actually lays out our strategy, we aim for 2% inflation on a sustainable basis. That is kind of our goal, and that’s how we do it. Am I comfortable with seeing a couple of numbers above 2%? Yes. I was comfortable with seeing numbers below 2% as long as I thought things were moving in the right direction and we were moving inflation up and our policy stance was consistent with that outlook.

  • Lael Brainard If we were to see a mild, temporary overshoot of the inflation target, this could well be consistent with the symmetry of the FOMC's target and may help nudge underlying inflation back to target.

    [ May 31, 2018 ]

    [T]he persistence of subdued inflation, despite an unemployment rate that has moved below most estimates of its natural rate, suggests some risk that underlying inflation--the slow-moving trend that exerts a pull on wage and price setting--may have softened.5 For example, some survey measures of longer-run inflation expectations are currently lower than they were before the financial crisis, as are most estimates based on statistical filters. Inflation compensation has moved up recently but is still running somewhat below levels that prevailed before the crisis.

    Re-anchoring underlying inflation at the Federal Open Market Committee's (FOMC) 2 percent objective is an important goal... [I]f we were to see a mild, temporary overshoot of the inflation target, this could well be consistent with the symmetry of the FOMC's target and may help nudge underlying inflation back to target.7

  • Lael Brainard In the median outlook in the FOMC's Summary of Economic Projections (SEP), the federal funds rate is projected to reach its longer-run value by 2019 and exceed it in 2020. If the 10-year term premium were to stay very low, that path would likely imply a yield curve inversion. But for the reasons I just noted, if the term premium remains low by historical standards, there would probably be less adverse signal from any given yield curve spread.

    [ May 31, 2018 ]

    Historically, yield curve inversions have had a reliable track record of predicting recessions in the United States.8 Since 1960, the 3-month Treasury yield has moved above the 10-year Treasury yield before every recession except the one in 1990, and, conversely, there has only been one case where the yield curve has inverted and a recession has not followed--in 1966...

    As we try to assess the implications of this flattening of the yield curve, it is important to take into account the very low level of the current 10-year yield by historical standards... One reason the 10-year Treasury yield may be unusually low is that market expectations of interest rates in the longer run may be unusually low... According to one estimate from Federal Reserve Board staff, the term premium has tended to be slightly negative in recent years. By contrast, when the spread between the 10-year and 3-month Treasury yields was at its peak in early 2010, this measure of the term premium was close to 100 basis points... With a very low term premium, any given amount of monetary policy tightening will lead to an inversion sooner so that even a modest tightening that might not have led to an inversion in the past could do so today...

    A second reason the term premium may be lower than in the past is the changing correlation between stock and bond returns, likely caused by changes in expected inflation outcomes. While in the 1970s and 1980s stock and bond returns tended to be positively correlated, more recently the correlation has tended to be negative. With an inverse correlation, bonds recently have been a good hedge for stocks, and that correlation may have contributed to lower bond term premiums by increasing the demand for bonds as an instrument for hedging portfolio risks...

    In the median outlook in the FOMC's Summary of Economic Projections (SEP), the federal funds rate is projected to reach its longer-run value by 2019 and exceed it in 2020. If the 10-year term premium were to stay very low, that path would likely imply a yield curve inversion. But for the reasons I just noted, if the term premium remains low by historical standards, there would probably be less adverse signal from any given yield curve spread.

  • Lael Brainard As suggested by the SEP median path, I believe that the forward-guidance language in the Committee statement that was introduced a few years ago that "the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run" is growing stale and may no longer serve its original purpose.

    [ May 31, 2018 ]

    As suggested by the SEP median path, I believe that the forward-guidance language in the Committee statement that was introduced a few years ago that "the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run" is growing stale and may no longer serve its original purpose.

  • James Bullard In my view, it is unnecessary for the FOMC to be so aggressive as to invert the yield curve.

    [ May 29, 2018 ]

    In my view, it is unnecessary for the FOMC to be so aggressive as to invert the yield curve… The U.S. nominal yield curve could invert later this year or in 2019, which would be a bearish signal for U.S. macroeconomic prospects.

  • Jerome H. Powell Forward guidance was highly useful in the crisis... I think it will have a significantly smaller role going forward.

    [ May 25, 2018 ]

    “Forward guidance was highly useful in the crisis,” Fed Chairman Jerome Powell said Friday, speaking on a panel at the Riksbank’s 350th anniversary conference in Stockholm. “I think it will have a significantly smaller role going forward.”

    “When forward guidance came around, the whole point of getting the market signal is that there’s independent content in that signal,” Powell said. “If the market’s really signaling that it understands what it thinks we’re doing, then you’ve lost the content of the signal.”

  • Robert S. Kaplan I'm not prepared to say yet I want to go above neutral.

    [ May 24, 2018 ]

    From CNBC: The Federal Reserve needs to raise interest rates about four more times before it reaches an equilibrium level, Dallas Fed President Robert Kaplan said Thursday.

    Speaking a day after the central bank released minutes from its May meeting, Kaplan said the Fed still has work to do before it can say it has its benchmark funds rate at a level that is considered "neutral" for growth.

    "My own view is we should be raising rates until we get to neutral," he told CNBC's Steve Liesman in a live interview from Dallas. "We should do it gradually. I'm not prepared to say yet I want to go above neutral."

  • Loretta J. Mester We need to be explaining to markets that one month's reading above 2% is not something to cause panic

    [ May 22, 2018 ]

    "We need to be explaining to markets that one month's reading above 2% is not something to cause panic," she said. "I think we're getting closer on the inflation front, and I think we're a little bit beyond on the labor front. I think we're close."

  • Raphael Bostic Given that measured inflation is already effectively on target, I won't be surprised to see a modest overshoot of our longer-run target. In fact, my own forecast is that, even with further gradual removal of monetary policy accommodation, inflation is likely to run a bit above 2 percent for a while.

    [ May 21, 2018 ]

    Given that measured inflation is already effectively on target, I won't be surprised to see a modest overshoot of our longer-run target. In fact, my own forecast is that, even with further gradual removal of monetary policy accommodation, inflation is likely to run a bit above 2 percent for a while.

  • Loretta J. Mester The goals of monetary policy and financial stability are interconnected…. Financial stability is a necessary but not sufficient condition for macroeconomic stability.

    [ May 18, 2018 ]

    The goals of monetary policy and financial stability are interconnected. Indeed, the FOMC’s statement on its monetary policy strategy says that the FOMC’s monetary policy decisions “reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee’s goals.” Financial stability is a necessary but not sufficient condition for macroeconomic stability. On the other side of the coin, macroeconomic stability is an important contributor to financial stability, and well-formulated and well-communicated monetary policy supports financial stability.

  • James Bullard When you’re at zero and you’re giving forward guidance, that’s one thing.  But we’re not at zero anymore.

    [ May 16, 2018 ]

    When you’re at zero and you’re giving forward guidance, that’s one thing.  But we’re not at zero anymore.

  • Raphael Bostic I have had extended conversations with my colleagues about a flattening yield curve and the risks of it inverting...  We are aware of it. So it is my job to make sure that doesn’t happen.

    [ May 16, 2018 ]

    "I have had extended conversations with my colleagues about a flattening yield curve” and the risks of it inverting, he said at a moderated forum in Augusta, Georgia on Wednesday. “We are aware of it. So it is my job to make sure that doesn’t happen.”

    ...

    Bostic said Wednesday he favors three rate hikes in total this year after three in 2017, though his outlook could change.

    “We don’t want to do it so fast that it is disruptive. That is why we are going at a slow, gradual pace,” he said about interest-rate increases. “Hopefully we won’t get to that inversion.”

  • John Williams We can’t keep talking about policy normalization once we’re around what we think of as a neutral interest rate... So I think this forward guidance, at some point, will be past its shelf life.

    [ May 15, 2018 ]

    “That language [in the FOMC post-meeting statement] still works today,” Williams said. But as interest rates approach neutral, a point that could be reached this year or early next, “We will have to come up with something at some point...That will be a committee decision about how best to describe where money policy is positioned.”

    ...

    “We can’t keep talking about policy normalization once we’re around what we think of as a neutral interest rate... So I think this forward guidance, at some point, will be past its shelf life.”

    “I do think that the statement language will have to evolve over time, to reflect the fact that at some point, we’ve got monetary policy to more normal levels -- we can’t keep talking about policy normalization once we’re around what we think of as a neutral interest rate. And so I think this forward guidance, at some point, will be past its shelf life.”

    ...

    “Even if we.move away from verbal forward guidance in the future, we’re still going to have this numerical forward guidance [in the dot plot and the SEP].  It’s not forward guidance in the same way: it’s not like, ‘further gradual increase in interest rates’, it’d be more about: well here’s the perspective of the participants.

    And if you think about it, once we’re closer to neutral, there will be a range of views about where interest rates should go, and it won’t be quite as clear cut as it is now, where the majority of people want to see us moving toward neutral.”

    ...

    “We probably need to do more work on communicating our reaction function, and not spending so much time trying to communicate our forward guidance.”

    “Now, in a perfect world, we’d find a way to use our economic projections to come up with a document that explained this in words. Right now economic projections are kind of a statistical artifact, and there’s no story to go along with that. Hopefully at some point, we’ll be able to provide, as a committee, a nice summary of -- here’s where we see the economy going. Here are the big drivers. Here are the uncertainties. And here’s what we think appropriate policy will be. We’re not going to do that anytime soon, but this was a project we contemplated years ago, a consensus forecast or something. I still think -- if we could figure out a way to do that, and make it practical, and make it effective, that would be a good way to get into this much more data-dependent, reaction-function mode.”

  • Robert S. Kaplan From Bloomberg: The yield curve is one of the considerations on my mind, which is why I’m not jumping away from three as a base case.

    [ May 15, 2018 ]

    The “yield curve is one of the considerations on my mind, which is why I’m not jumping away from three as a base case,” Kaplan said Tuesday in a Bloomberg News interview. “I don’t want to knowingly invert the yield curve, but I think it’s too soon to say how much operating flexibility we are going to have."

    “I’d like to first get to neutral, see if we can do that, and then we’ll have to make a judgment when that time comes” about whether to continue raising rates, Kaplan said. “But even in my dot plot submissions, I would not be submitting estimates that would, in my view, knowingly invert the yield curve.”

  • Richard Clarida I do believe that the benefits of QE diminished as more and more rounds were added, and that the cost of QE went up.

    [ May 15, 2018 ]

    I do believe that the benefits of QE diminished as more and more rounds were added, and that the cost of QE went up.

  • Randal Quarles I believe we should consider whether the internal TLAC calibration for IHCs could be adjusted to reflect the practice of other regulators without adversely affecting resolvability and U.S. financial stability. The current calibration is at the top end of the scale set forth by the FSB, and willingness by the United States to reconsider its calibration may prompt other jurisdictions to do the same...

    [ May 15, 2018 ]

    The single-point-of-entry (SPOE) and bail-in concepts hold particular promise for most large global firms. However, a successful SPOE resolution of a large global firm has not yet been attempted and will require close cooperation among a large number of stakeholders, including both home and host country regulators. This cooperation will be based on an understanding of separate and mutual interests, not on trust alone. So while SPOE creates a potentially workable framework for resolution, setting the conditions for cooperation is critical. I grew up among the ranches of the American West, where we lived by the motto taught to me as a young child: trust everyone, but brand your cattle. This is a theme that will run throughout my remarks today.

    ...

    Regarding liquidity, the Board and FDIC expect a U.S. G-SIB to appropriately estimate and maintain sufficient liquidity for material entities, an expectation known as Resolution Liquidity Adequacy and Positioning, or RLAP.4 RLAP expectations are intended to be designed so that liquidity is not "double counted" among home and host jurisdictions, to provide transparency into the location of liquidity across the firm's material entities, and to ensure that liquidity can flow where needed with minimal potential disruption. The RLAP approach is aimed at ensuring that surpluses in one host jurisdiction generally are not relied upon to meet deficits in another host jurisdiction, given the confusion and vulnerabilities such reliance can cause in an actual stress. Specifically, a firm should be able to measure the stand-alone liquidity position of each material entity and ensure that liquidity is readily available either at the parent or at that entity to meet any deficits.5 As with capital, firms are expected to have a balance of prepositioned and centrally managed liquidity--specifically, by balancing the certainty associated with holding liquidity directly at material entities against the flexibility provided by holding high-quality liquid assets at the parent available to meet unanticipated outflows at material entities.

    ...

    For IHCs that are subsidiaries of foreign-owned G-SIBs, the Federal Reserve requires such a firm to issue a minimum amount of loss-absorbing instruments to its foreign parent, known as internal TLAC, including a minimum amount of unsecured long-term debt.6 In the event that an IHC was experiencing significant financial distress, the internal TLAC could be used to replenish the IHC's equity and maintain its solvency. The U.S. implementation of internal TLAC is modeled on the internal TLAC framework developed by the Financial Stability Board (FSB), which includes a calibration of the amount of loss-absorbing resources that should be prepositioned in a given jurisdiction.7 Specifically, the FSB contemplates that internal TLAC requirements of a subsidiary of a foreign bank expected to be resolved through SPOE would be calibrated at 75 to 90 percent of the external TLAC requirement that would apply to the subsidiary if it were to be separately resolved. In implementing the TLAC standards in the United States, the Board calibrated the internal TLAC requirement for IHCs of foreign-owned G-SIBs at the high end of the FSB range, at around 90 percent.

    ...

    There are two principal points I have been making today. The first is that some amount of local capital and liquidity prepositioning can reduce the incentives for damaging and unpredictable seizures of resources by local regulators during times of stress--thus actually reducing the likelihood that improvised, beggar-thy-neighbor ring-fencing would frustrate completion of a successful SPOE resolution in the future. As we learned long ago out West, the branding of cattle creates the possibility of trust.

    The second point, however, is equally important: the best prepositioning structure is not an eternal verity mathematically deducible from first principles, but it is instead a practical balance designed to promote cooperation among humans, and any such balance is likely to be improvable with experience, reflection, and debate...

    There are two principal points I have been making today. The first is that some amount of local capital and liquidity prepositioning can reduce the incentives for damaging and unpredictable seizures of resources by local regulators during times of stress--thus actually reducing the likelihood that improvised, beggar-thy-neighbor ring-fencing would frustrate completion of a successful SPOE resolution in the future. As we learned long ago out West, the branding of cattle creates the possibility of trust.

    The second point, however, is equally important: the best prepositioning structure is not an eternal verity mathematically deducible from first principles, but it is instead a practical balance designed to promote cooperation among humans, and any such balance is likely to be improvable with experience, reflection, and debate...

    We continue to believe that the IHC and attendant requirements are appropriate for foreign banks with large U.S. operations. However, in light of our experience with these structures, I believe we should consider whether the internal TLAC calibration for IHCs could be adjusted to reflect the practice of other regulators without adversely affecting resolvability and U.S. financial stability. The current calibration is at the top end of the scale set forth by the FSB, and willingness by the United States to reconsider its calibration may prompt other jurisdictions to do the same, which could better the prospects of successful resolution for both foreign G-SIBs operating in the United States, and for U.S. G-SIBs operating abroad. Alternatively, it may be possible to streamline the elements of our resolution loss absorbency regime, which include both TLAC and long-term debt requirements. I will be recommending to my colleagues that we look closely at these possibilities in the coming weeks and seek comment on ways to further improve this framework.

  • James Bullard Unless we screw up I think the dollar is going to be the dominant currency.

    [ May 14, 2018 ]

    He also brushed aside suggestions that the U.S. dollar was in jeopardy of being dethroned by bitcoin or another upstart cryptocurrency (or fiat currency).

    “The dollar is in great shape today and will stay in great shape because it has been the winner in the currency competition over a long period of time,” he said, contending that is backed by the largest economy in the world, prevails in international trade and is backed by sound monetary policy that has produced low and stable inflation for the last two decades.

    “Unless we screw up I think the dollar is going to be the dominant currency.”

  • Loretta J. Mester As the expansion continues, it could be that in order to maintain our policy goals, we may need to move the fed funds rate, for a time, a bit above the level of the funds rate that is expected to prevail over the longer run. 

    [ May 14, 2018 ]

    As the expansion continues, it could be that in order to maintain our policy goals, we may need to move the fed funds rate, for a time, a bit above the level of the funds rate that is expected to prevail over the longer run. Indeed, the March Summary of Economic Projections indicates that the median appropriate policy path has the fed funds rate in 2020 moving a bit above the estimate of its longer-run level, which is about 3 percent.

  • James Bullard Analysis [regarding r-star conducted earlier this year] also suggests that the nominal policy rate set by the FOMC is already pressing against the upper bound of a neutral setting.

    [ May 11, 2018 ]

    Analysis [regarding r-star conducted earlier this year] also suggests that the nominal policy rate set by the FOMC is already pressing against the upper bound of a neutral setting.

  • Jerome H. Powell While global factors play an important role in influencing domestic financial conditions, the role of U.S. monetary policy is often exaggerated. And while financial globalization does pose some challenges for monetary policy, efforts to build stronger and more transparent policy frameworks and a more resilient financial system can reduce the adverse consequences of external shocks.

    [ May 8, 2018 ]

    Today I will focus in particular on the role of U.S. monetary policy in driving global financial conditions and capital flows. To preview my conclusions, I will argue that, while global factors play an important role in influencing domestic financial conditions, the role of U.S. monetary policy is often exaggerated. And while financial globalization does pose some challenges for monetary policy, efforts to build stronger and more transparent policy frameworks and a more resilient financial system can reduce the adverse consequences of external shocks.

  • Randal Quarles What will the Fed be monitoring as reserves are drained and the balance sheet shrinks? I would first like to emphasize that the Fed regularly monitors financial markets for a number of reasons, so I do not mean to imply that we will be doing anything that is very much different for our normal practice. As reserves continue to be drained, we will want to gauge how banks are managing their balance sheets in continuing to meet their LCRs, watching in particular how the distribution of reserve balances across the banking system evolves as well as monitoring any large-scale changes in banks' holdings of other HQLA-eligible assets, including Treasury securities and agency mortgage-backed securities. And on the liabilities side of banks' books, we will be keeping our eye on both the volume and the composition of deposits... Of course, importantly, deposits will not necessarily decline one-for-one with reserve balances as the Fed's balance sheet shrinks. The overall effects of the decline in the Fed's balance sheet will depend both on who ultimately ends up holding the securities in place of the Fed and on the full range of portfolio adjustments that other economic agents ultimately make as a result. We will also be monitoring movements in interest rates. In part, we will be tracking how the yields and spreads on the various assets that banks use to meet their LCR requirements evolve. For example, to the extent that some banks will wish to keep meeting a significant portion of their LCR requirements with reserves, the reduction in the Fed's balance sheet and the associated drop in aggregate reserves could eventually result in some upward pressure on the effective federal funds rate and on yields of Treasury securities. This situation could occur if some banks eventually find that they are holding fewer reserves than desired at a given constellation of interest rates and, in response, begin to bid for more federal funds while selling Treasury securities or other assets. Interest rates will adjust up until banks are indifferent with regard to holding the relatively smaller volume of reserves available in the banking system.

    [ May 4, 2018 ]

    Of course, importantly, deposits will not necessarily decline one-for-one with reserve balances as the Fed's balance sheet shrinks. The overall effects of the decline in the Fed's balance sheet will depend both on who ultimately ends up holding the securities in place of the Fed and on the full range of portfolio adjustments that other economic agents ultimately make as a result.

  • Robert S. Kaplan For me, neutral is somewhere between 2.5 or 2.75.

    [ May 4, 2018 ]

    I think that the fed should continue to gradually remove accommodation, certainly, until we get to inflation, until we get to neutral, and, for me, neutral is somewhere between 2.5 or 2.75, that would be my best estimate of neutral. Where we go from there, I'm a little unsure.

  • John Williams I am personally comfortable with the fact that inflation may overshoot that 2 percent for a while.

    [ May 4, 2018 ]

    "From the beginning we've seen our inflation target being a symmetric one, where we want inflation on average to be 2 percent — sometimes above, sometimes below," he said in an interview with CNBC's Steve Liesman on "Power Lunch."

    "I am personally comfortable with the fact that inflation may overshoot that 2 percent for a while," he added.

  • William C. Dudley I wouldn’t quite declare victory yet [on consistently achieving the Fed’s 2 percent inflation target].

    [ May 4, 2018 ]

    “I wouldn’t quite declare victory yet” on consistently achieving the Fed’s 2 percent inflation target, Dudley said Friday in New York during an interview with Bloomberg Editor-in-Chief Emeritus Matthew Winkler. “The inflation data goes up and down month to month, but we have made some progress and I am certainly happy where we are today.”

  • Charles L. Evans Some cyclical upturn in inflation is actually welcome because it should help solidify expectations symmetrically around our 2 percent objective. This is necessary for achieving our inflation target on a sustainable basis.

    [ April 20, 2018 ]

    Some cyclical upturn in inflation is actually welcome because it should help solidify expectations symmetrically around our 2 percent objective. This is necessary for achieving our inflation target on a sustainable basis.

    In this setting, the federal funds rate does not need to be increased as much above its neutral setting as in the past when trend inflation needed to be taken down several notches. Gradual policy increases in this context make sense—certainly as a way to limit the damage if policy ever actually becomes overly tight too soon.

  • Loretta J. Mester Recent research from the Cleveland Fed suggests that a strategy to overheat the economy in an attempt to pull more people back into the workforce is unlikely to have any lasting effect on labor force participation. Yet, overheating would have costs.

    [ April 19, 2018 ]

    t is appropriate to continue to remove some of the monetary policy accommodation to ensure we avoid a build-up in risks to macroeconomic stability that could arise if the economy were allowed to overheat. Recent research from the Cleveland Fed suggests that a strategy to overheat the economy in an attempt to pull more people back into the workforce is unlikely to have any lasting effect on labor force participation. Yet, overheating would have costs — it would necessitate sharper rate increases that could in themselves be destabilizing.

    A gradual upward path of interest rates should also help to avoid financial imbalances and a potential build-up of financial stability risks that could arise from the extended period of very low interest rates. Currently, in my assessment, financial stability vulnerabilities are at a moderate level.

  • Lael Brainard Asset valuations across a range of markets remain elevated relative to a variety of historical norms, even after taking into account recent market volatility.

    [ April 19, 2018 ]

    Our scan of financial vulnerabilities suggests elevated risks in two areas: asset valuations and business leverage. First, asset valuations across a range of markets remain elevated relative to a variety of historical norms, even after taking into account recent market volatility. Corporate bond yields remain low by historical comparison, and spreads of yields on junk bonds above those on comparable-maturity Treasury securities are near the lower end of their historical range. Spreads on leveraged loans and securitized products backed by those loans remain narrow. Prices of multifamily residential and industrial commercial real estate (CRE) have risen, while capitalization rates for these segments have reached historical lows.

    Second, business leverage outside the financial sector has risen to levels that are high relative to historical trends. In the nonfinancial business sector, the debt-to-income ratio has increased to near the upper end of its historical distribution, and net leverage at speculative-grade firms is especially elevated. As we have seen in previous cycles, unexpected negative shocks to earnings in combination with increased interest rates could lead to rising levels of delinquencies among business borrowers and related stresses to some banks' balance sheets.

  • Randal Quarles I don't think it's likely the inversion of the yield curve is a reflection of a recession to come.

    [ April 18, 2018 ]

    I don't think it's likely the inversion of the yield curve is a reflection of a recession to come.

  • William C. Dudley In my view, the case for retaining the current floor system is very compelling.

    [ April 18, 2018 ]

    For [the implementation of Fed’s policy framework], I see two options: return to the “corridor”-type system that was in place prior to the financial crisis, or remain with the framework that has been in place since the crisis—namely, a “floor” system.

    In my view, the case for retaining the current floor system is very compelling for a number of reasons.  First, it is operationally much less complex than a corridor system.  In the current regime, the setting of IOER is largely sufficient to maintain the federal funds rate within the FOMC’s target range, as we have seen over the past few years.10  In contrast, a corridor system requires forecasting the many exogenous factors that affect the amount of bank reserves outstanding, and then engaging in open market operations on a near daily basis to keep reserves at a level consistent with the FOMC’s target range. This task would likely be more difficult now because of greater fluctuation in these exogenous factors relative to when the corridor regime was last in place.

    Second, a corridor system constrains the Federal Reserve’s ability to provide the types of lender-of-last-resort backstops that can help support financial stability… My overall point is that broad-based, open-ended lender-of-last-resort facilities are more difficult to accommodate in a corridor system because of the need to drain any reserve additions to keep the federal funds rate close to the FOMC’s target.

  • John Williams The flattening of the yield curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates, long rates have gone up somewhat -- but it’s totally normal that the yield curve gets flatter.

    [ April 17, 2018 ]

    [Williams] said a truly inverted yield curve “is a powerful signal of recessions” that historically has occurred “when the Fed is in a tightening cycle, and markets lose confidence in the economic outlook.” That is not the case now, he said.

    “The flattening of the yield curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates, long rates have gone up somewhat -- but it’s totally normal that the yield curve gets flatter,” Williams said.

    “I don’t see the signs yet of an inverted yield curve.”

  • William C. Dudley I don't know what neutral is precisely, but I think 3% is a reasonable starting point in terms of thinking about what neutral might be over the long run.

    [ April 16, 2018 ]

    I don't know what neutral is precisely, but I think 3% is a reasonable starting point in terms of thinking about what neutral might be over the long run. But it depends on so many other factors. What's happening to the stock market, what's happening to the bond market, what's happening to the dollar. So this idea that there's this magic neutral rate that's sort of constant for all time I think is not a good way of looking at it.

  • Neel Kashkari It now seems much more likely that we are going to actually achieve our inflation target in the near future, which would be a good thing. And I do think that the fiscal packages have probably helped somewhat.

    [ April 16, 2018 ]

    I think it’s likely that the fiscal actions that have been taken are going to on the margin help us achieve our inflation target. I was much more skeptical of whether we were on track to hitting 2% over the medium term. It now seems much more likely that we are going to actually achieve our inflation target in the near future, which would be a good thing. And I do think that the fiscal packages have probably helped somewhat. And so that’s why I think that that does lend support for, you know, the path that the SEP is forecasting.

  • Eric Rosengren I am in favor of somewhat more tightening than the median [Federal Open Market Committee] member.

    [ April 13, 2018 ]

    Referring to the Fed’s current outlook that guides for about three rate rises this year, Mr. Rosengren said “my own forecast is somewhat stronger in terms of unemployment rates and inflation outcomes,” and he expects today’s 4.1% jobless rate to fall to 3.7% this year.

    Because of this robust outlook, “I am in favor of somewhat more tightening than the median [Federal Open Market Committee] member,” he said.

  • Robert S. Kaplan I’m not going to say blindly we should be raising rates if the curve keeps flattening.”

    [ April 10, 2018 ]

    “I, for one, am going to be watching the yield curve very carefully,” Kaplan said. “I’m not going to say blindly we should be raising rates if the curve keeps flattening.”

  • Charles L. Evans If inflation remains on track for 2 percent, continuing our slow, gradual increases will be appropriate to get us to the point where monetary policy isn’t really providing more lift to the economy.

    [ April 7, 2018 ]

    “Fiscal policy has been much more supportive of further growth and so the need for accommodative monetary policy is less than it was before,” Evans told reporters in comments after a talk at the University of Chicago Graduate China Forum.

    The Fed next meets to set policy in June. If it remains on track for 2 percent, and inflation expectations rise, “continuing our slow, gradual increases will be appropriate to get us to the point where monetary policy isn’t really providing more lift to the economy.”

    ...

    “I am optimistic that we are going get to 2 percent; it would be surprising if we didn’t, I just want to make sure we do,” he said. “In that environment, a gradual increase in our interest rate range objectives is appropriate.”

  • Jerome H. Powell As a nation, we are not bystanders. We can put policies in place that will support labor force participation and give us the best chance to achieve broad and sustained increases in productivity, and thus in living standards.

    [ April 6, 2018 ]

    To summarize this discussion, some of the factors weighing on longer-term growth are likely to be persistent, particularly the slowing in growth of the workforce. Others are hard to predict, such as productivity. But as a nation, we are not bystanders. We can put policies in place that will support labor force participation and give us the best chance to achieve broad and sustained increases in productivity, and thus in living standards. These policies are mostly outside the toolkit of the Federal Reserve, such as those that support investment in education and workers' skills, business investment and research and development, and investment in infrastructure.

  • Jerome H. Powell The FOMC's patient approach has paid dividends and contributed to the strong economy we have today... My FOMC colleagues and I believe that, as long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals. 

    [ April 6, 2018 ]

    At our meeting last month, the FOMC raised the target range for the federal funds rate by 1/4 percentage point, bringing it to 1-1/2 to 1-3/4 percent. This decision marked another step in the ongoing process of gradually scaling back monetary policy accommodation. The FOMC's patient approach has paid dividends and contributed to the strong economy we have today.

    Over the next few years, we will continue to aim for 2 percent inflation and for a sustained economic expansion with a strong labor market. As I mentioned, my FOMC colleagues and I believe that, as long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals. 

  • John Williams Our recent projections indicate that the center of the distribution of FOMC projections foresees a total of three to four rate increases this year and further gradual rate increases over the next two years, bringing the target federal funds rate to around 3-1/2 percent by the end of 2020. In my view, this is the right direction for monetary policy.

    [ April 6, 2018 ]

    The good news is for most of the past year, inflation has been running closer to 2 percent. With the economy strong, and strengthening further, I expect that we’ll see inflation reach and actually slightly exceed our longer-run 2 percent goal for the next few years.

    ...

    [O]ur recent projections indicate that the center of the distribution of FOMC projections foresees a total of three to four rate increases this year and further gradual rate increases over the next two years, bringing the target federal funds rate to around 3-1/2 percent by the end of 2020. In my view, this is the right direction for monetary policy.

    ...

    To sum up: the outlook is very positive. The economy is on course to be as strong as we have seen in many decades and inflation is moving closer to our target. The challenge for monetary policy is to keep it that way. This is never an easy task, but we are well positioned to achieve our goals, and to respond to any unexpected twists and turns that may lie in the economic road ahead.

  • Raphael Bostic I am actually very comfortable going above the 2 percent by some amount… I think it is also important that we take a stance so that everyone understands that the 2 percent level is an average, not a ceiling.

    [ April 5, 2018 ]

    “I am actually very comfortable going above the 2 percent by some amount -- 2.2, 2.3 -- I don’t think that is a crisis of overheating,” he told Bloomberg Television’s Michael McKee in an interview Thursday in Sarasota, Florida. “I think it is also important that we take a stance so that everyone understands that the 2 percent level is an average, not a ceiling.”

  • James Bullard It is possible that the nominal yield curve will invert sometime in the next year, but recently the 10-year yield has increased enough to keep pace with the FOMC’s rate increases.

    [ April 4, 2018 ]

    It is possible that the nominal yield curve will invert sometime in the next year, but recently the 10-year yield has increased enough to keep pace with the FOMC’s rate increases.

  • Lael Brainard The quarterly assessment of financial stability is a critical input into the Board's processes for adjusting the supervisory scenarios used in the stress test and the setting of the countercyclical capital buffer--the two tools that permit the Board to respond to vulnerabilities that build over time.

    [ April 3, 2018 ]

    The primary focus of financial stability policy is tail risk (outcomes that are unlikely but severely damaging) as opposed to the modal outlook (the most likely path of the economy). The objective of financial stability policy is to lessen the likelihood and severity of a financial crisis. Guided by that objective, our financial stability work rests on four interdependent pillars: systematic analysis of financial vulnerabilities; standard prudential policies that safeguard the safety and soundness of individual banking organizations; additional policies, which I will refer to as "macroprudential," that build resilience in the large, interconnected institutions at the core of the system; and countercyclical policies that increase resilience as risks build up cyclically.

    ...

    [T]he quarterly assessment of financial stability is a critical input into the Board's processes for adjusting the supervisory scenarios used in the stress test and the setting of the countercyclical capital buffer--the two tools that permit the Board to respond to vulnerabilities that build over time.

  • Patrick Harker It’s more the firming of inflation that’s moved me from two to three.

    [ March 29, 2018 ]

    WSJ: How much of the change, then, from two to three [rate increases in the baseline projection] is because of the fiscal policy, the aggregate demand boost.

    MR. HARKER: For me, it’s more the firming of inflation that’s moved me from two to three. And again, if I see inflation continuing to move toward 2% and if it would accelerate, then I would consider even further increases. But again, I’d need to see the data before I make that decision.

  • Raphael Bostic Coming into this year, we had penciled in three moves for the year. And I think the risks are to the upside.

    [ March 27, 2018 ]

    WSJ: So does the fiscal boost, with the unemployment rate being historically low, change your view about the path of monetary policy right now?

    MR. BOSTIC: Not immediately. If you look at my expectations around monetary policy, the risks are now to the upside now. So coming into this year, we had penciled in three moves for the year. And I think the risks are to the upside. We’re going to be monitoring—I’ll tell you that the business contacts that we’ve reached out to, they’re saying they’re not expecting significant changes to their capital expenditures for the first half of this year. So if you think about what it’s going to look like for this year, I don’t think we’re going to see a huge ramp up, if what they’re reporting is accurate. And so we’re really looking in the out years. And a lot of what we’re going to be trying to get a handle on is what does the trajectory of the economy look like in the out years—2019, 2020, 2021.

  • Loretta J. Mester If the economy evolves as I anticipate, I believe further gradual increases in interest rates will be appropriate this year and next year.

    [ March 26, 2018 ]

    “If the economy evolves as I anticipate, I believe further gradual increases in interest rates will be appropriate this year and next year,” Mester said in a speech at Princeton University. The Fed must “avoid a build-up in risks to macroeconomic stability that could arise if the economy were allowed to overheat,” she added.

  • Eric Rosengren I am going to suggest that policymakers should view financial stability tools more holistically. Indeed, I would like to suggest that the ability to appropriately set financial stability tools is integrally related to the ability to fully utilize fiscal, monetary, and financial stability policy tools to respond to a large adverse financial shock.

    [ March 23, 2018 ]

    Financial stability policy is generally associated with regulatory and supervisory measures, so the exercise of financial stability policy is often seen as being independent from the stance of monetary and fiscal policy. However, I am going to suggest that policymakers should view financial stability tools more holistically. Indeed, I would like to suggest that the ability to appropriately set financial stability tools is integrally related to the ability to fully utilize fiscal, monetary, and financial stability policy tools to respond to a large adverse financial shock.

    The use of financial stability tools is generally seen as being conditioned on and calibrated to the severity of likely economic stresses – but I would argue that it is also critically important to take into account the extent to which monetary and fiscal policy are equipped to respond to an adverse financial shock, so that policymakers can best coordinate the response to a crisis across all available tools. Much of what I have in mind has to do with assessing each policy tool’s capacity to respond.

    For example, suppose that a country’s government-debt-to-GDP ratio is high, limiting the ability or willingness to use fiscal tools to offset financial and other shocks. If that country has also not developed sufficient financial stability response tools, then most of the countercyclical policy response will likely fall to monetary policy. Alternatively, if the government-debt-to- GDP ratio is extremely high and interest rates are already at or near the effective lower bound, and the country is unable or unwilling to use less-conventional monetary tools like quantitative easing, then financial stability tools are likely to be more important. In sum, it is important to consider whether there is sufficient capacity in the toolkit for policymakers to adequately (let alone optimally) respond to severe financial shocks.

  • James Bullard You would not have to go very high in this environment to be in a restrictive policy stance.  If we went too far we would start to put downward pressure on inflation in an environment where inflation is already below target.

    [ March 11, 2018 ]

    James Bullard, the St Louis Fed president and one of a handful of doves in the Fed system, said lifting rates four times in 2018 could drive down inflation — especially when the central bank’s programme of reducing its asset holdings is becoming “more and more forceful”.

    The central bank began gradually unwinding its $4.5tn balance sheet in October last year.

    “You would not have to go very high in this environment to be in a restrictive policy stance,” Mr Bullard said in a Financial Times interview. “If we went too far we would start to put downward pressure on inflation in an environment where inflation is already below target.”

  • Eric Rosengren I expect that it will be appropriate to remove monetary policy accommodation at a regular but gradual pace – and perhaps a bit faster than the three, one-quarter point increases envisioned for this year in the assessment of appropriate policy from the December 2017 FOMC meeting.

    [ March 9, 2018 ]

    [T]he stock and bond markets have become much more volatile in recent weeks. This likely reflects, in part, the realization that financial markets need to factor in the risk that wages and prices could grow too quickly, if there were too much fiscal and monetary stimulus – particularly with the economy currently at or beyond full employment and inflation approaching the Fed’s goal. I view the underlying insight as a healthy realization by market participants that the risks are two-sided: Unsustainably strong growth that leads to excessive inflation or financial imbalances is now as much a risk as growth that falls short. And there is a realization that monetary policymakers need to be vigilant in calibrating the level of accommodation, if continued sustainable growth is to be achieved...

    To keep the economy on a sustainable path, I expect that it will be appropriate to remove monetary policy accommodation at a regular but gradual pace – and perhaps a bit faster than the three, one-quarter point increases envisioned for this year in the assessment of appropriate policy from the December 2017 FOMC meeting.

  • Charles L. Evans My own preference would be to wait a little bit longer, let the March anomalous inflation rate from a year ago fall out.

    [ March 9, 2018 ]
    Chicago Federal Reserve President Charles Evans told CNBC on Friday he's still nervous about continued low inflation and would prefer to "wait a little longer" than this month's meeting before raising interest rates for the first time in 2018. "My own preference would be to wait a little bit longer, let the March anomalous inflation rate from a year ago fall out," said Evans, who is not a policy voting member this year but takes part in the meetings.

    "Let's make sure these sort of Amazon, disruptive kind of pricing models aren't continuing to find their way into keeping inflation lower than that," he added in a "Squawk Box" interview.

    By midyear, if inflation does show signs of increasing to the Fed's 2 percent target, Evans said, he would be "much more confident" to continue "a gradual upward adjustment of the funds rate."  The trajectory of rates is much more important than whether there are "three, two, four rate increases" this year, Evans said.

  • Raphael Bostic Some of the developments with the trade policy has introduced some uncertainty as to how the economy is going to perform, so I am really taking a wait-and-see attitude... Everything is on the table.

    [ March 7, 2018 ]

    “Some of the developments with the trade policy has introduced some uncertainty as to how the economy is going to perform, so I am really taking a wait-and-see attitude,’’ Bostic told reporters Wednesday in Fort Lauderdale, Florida. Asked whether he was deciding between two or three increases, or three or four, he said, “Everything is on the table.’’

  • Robert S. Kaplan It's three for this year - I think we should get started sooner rather than later though.

    [ March 6, 2018 ]

    My base case, as you've heard me say, hasn't changed. It's three for this year - I think we should get started sooner rather than later though. And we’ll see as the year unfolds whether the base case should stay at 3 or it should be something more, something less but for now I’d say three and I think we should get started soon.

  • Lael Brainard We do not have extensive experience with an economy at very low unemployment rates and cannot be sure how it might evolve. In particular, we will want to remain attentive to the risk of financial imbalances... Continued gradual increases in the federal funds rate are likely to remain appropriate to ensure inflation rises sustainably to our target and to sustain full employment...

    [ March 6, 2018 ]

    Many of the forces that acted as headwinds to U.S. growth and weighed on policy in previous years are generating tailwinds currently. Today many economies around the world are experiencing synchronized growth, in contrast to the 2015­-16 period when important foreign economies experienced adverse shocks and anemic demand...

    The upward revisions to the foreign economic outlook are also pulling forward expectations of monetary policy tightening abroad and contributing to an appreciation of foreign currencies and increases in U.S. import prices.  

    In recent quarters, the combination of higher oil prices and robust global demand has been providing strong support to business investment--in contrast to the sharp pullback from 2015 to 2016...

    Financial conditions are currently supportive of economic growth despite the recent choppiness in financial markets and some tightening since the beginning of the year. Various measures of equity valuations remain elevated relative to historical norms even after recent movements, and corporate bond spreads remain quite compressed...

    The most notable tailwind is the shift in America's fiscal policy stance from restraint to substantial stimulus in an economy close to full employment... Estimates suggest that December's tax legislation could boost the growth rate of real gross domestic product (GDP) as much as 1/2 percentage point this year and next. On top of that, the recently agreed-to budget deal is likely to raise federal spending by around 0.4 percent of GDP in each of the next two years.

    ...

    [W]e do not have extensive experience with an economy at very low unemployment rates and cannot be sure how it might evolve. In particular, we will want to remain attentive to the risk of financial imbalances...We will need to be vigilant...

    Continued gradual increases in the federal funds rate are likely to remain appropriate to ensure inflation rises sustainably to our target and to sustain full employment, keeping in mind that interest rate normalization is well under way and balance sheet runoff is set to reach its steady-state pace later this year.

  • Randal Quarles  If none of the regulatory measures implemented up to now were capable of improvement, this would be the first project of this scale and complexity conducted that had been done exactly right the first pass through. If there was still work to be done after Hammurabi, there is probably still some work to be done now after Dodd and Frank.

    [ March 5, 2018 ]

    If none of the regulatory measures implemented up to now were capable of improvement, this would be the first project of this scale and complexity conducted that had been done exactly right the first pass through. If there was still work to be done after Hammurabi, there is probably still some work to be done now after Dodd and Frank.

    ...

    The [Volcker] rule contains a gaggle of complex regulatory requirements, but the statute contains merely one--that the market making-related activities are designed not to exceed the reasonably expected near-term demands of clients, customers, or counterparties, otherwise known as RENT'D.  We are considering different ways to use a clearer test for RENT'D. We want banks to be able to engage in market making and provide liquidity to financial markets with less fasting and prayer about their compliance with the Volcker rule.

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/newsevents/speech/quarles20180305a.htm

    Venue:

    Institute of International Bankers
  • William C. Dudley If you were to go to four rate hikes I think it would still be gradual.

    [ March 1, 2018 ]

    “If you were to go to four ... rate hikes I think it would still be gradual,” Dudley said at a Sao Paulo conference. He noted that would be half as aggressive as the eight-per-year hikes the Fed executed last decade, which he called the “alternative to gradual.”

  • Randal Quarles My assessment of the current state of the economy is optimistic. I also think there is a real possibility that some of the factors that have been holding back growth in recent years could shift, moving the economy onto a higher growth trajectory. That said, I currently see this shift more as a clear possibility than an unarguable reality.

    [ February 26, 2018 ]

    My assessment of the current state of the economy is optimistic. I also think there is a real possibility that some of the factors that have been holding back growth in recent years could shift, moving the economy onto a higher growth trajectory. That said, I currently see this shift more as a clear possibility than an unarguable reality.

  • John Williams From Bloomberg: “Right now it’s conjecture,” Williams said, but “my view is that other fundamentals haven’t changed in any way,” so while the neutral rate may have moved higher in response to tax cuts, it would be by a relatively small amount.

    [ February 23, 2018 ]

    “Right now it’s conjecture,” Williams said, but “my view is that other fundamentals haven’t changed in any way,” so while the neutral rate may have moved higher in response to tax cuts, it would be by a relatively small amount.

  • William C. Dudley The terminal balance sheet may actually turn out to be even higher than $2.9 trillion.

    [ February 23, 2018 ]

    During the discussion at the Chicago Booth monetary policy forum, Dudley said he is a “strong advocate” for the floor system for setting interest rates, which requires large amount of excess reserves in the system.

    “So the terminal balance sheet may actually turn out to be even higher” than the $2.9 trillion level estimated by Wall Street economists in a paper presented at the forum, Dudley said.

  • William C. Dudley Concluding that LSAPs are less powerful than suggested by some of the estimates from the event study literature does not imply that there is no role for LSAPs at the zero lower bound... [D]iscarding such a tool or ruling out its use seems counterproductive for two reasons. First, to the extent that such a tool can provide accommodation, ruling out its use would raise the risks of insufficient monetary policy accommodation when interest rates are pinned at the zero lower bound. Second, expectations matter. If households and businesses believe that the Fed has run out of tools to provide monetary policy accommodation or is unwilling to use certain tools for that purpose, the risk of inflation expectations becoming unanchored to the downside would increase, which would make it even more difficult for the central bank to achieve its goals. For these reasons, LSAPs should be viewed as a viable tool in our arsenal to be used when the zero lower bound is a relevant policy concern

    [ February 23, 2018 ]
  • 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.

  • Randal Quarles Suffice to say, a deviation from our target of a few tenths of 1 percentage point, especially one I expect to fade, does not cause me great concern.

    [ February 22, 2018 ]

    Suffice to say, a deviation from our target of a few tenths of 1 percentage point, especially one I expect to fade, does not cause me great concern.

  • 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.

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

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    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.

  • William C. Dudley Another thing to look at is should we have a range for the inflation rate rather than just a 2 per cent target? I think the 2 per cent objective is a little bit overly precise.

    [ January 18, 2018 ]

    A:  I would not start with the notion of what should we be looking at in terms of our inflation target. I would back up one step and say we should be thinking about the issue of the zero lower bound and what is the risk that in the next recession we could be pushed back to the zero lower bound, and then how do we feel about that and how do we feel about whether we have sufficient instruments to sort of manage that process... You really want to evaluate what are the tools we have to generate an economic recovery after the next recession if we are actually pinned at the zero lower bound. I think we are in some ways in better shape today than we were 10 years ago, because we actually have policies that we have pursued that I think have proven to be effective — namely forward guidance and quantitative easing. In some ways the risk of inflation expectations becoming un-anchored to the downside, which is one of the big risks of being pinned at the zero lower bound, that seems diminished relative to where we were 10 years ago in my opinion. But don’t get me wrong. This is definitely worth evaluating. This is a key issue for monetary policy. At the same time I don’t want to overstate the degree of concern I have. Because remember we have only been pinned at the zero lower bound once, in the post world war two period. That is a period of 70 years and we have only had one experience. I don’t want to totally upend monetary policy because of concerns we might go back to the zero lower bound, because I would worry a little bit that I was fighting the last war.

    Q: The reason people say you would not be fighting the last war is this debate we have just been discussing, which is that r* is going to stay low . . . 

    A: But we don’t know that yet. We don’t know what the terminal federal funds point is going to be in this particular business cycle . . . There is a presumption it will be low and there is a presumption we will not have that much room to lower it, but we don’t really know that yet. I don’t want to get ahead of ourselves. I think it is completely reasonable to evaluate all this and I think we have to really study it very carefully but I don’t think we want to jump to conclusions just because we got pinned at the zero lower bound in the last crisis and I don’t think we want to conclude that r* is necessarily depressed permanently and that has some long term consequences for monetary policy. In terms of my own thought process on this I guess thinking about a price level targeting regime is something worthy of evaluating. Ben Bernanke has proposed an asymmetric price level targeting regime where you basically make up shortfalls when you are running below your inflation target but don’t make up shortfalls when you are running above. 

    Q: Kind of complicated . . . 

    A: . . . on the downside it is complicated but I understand why he is proposing it that way. Price level targeting does have some attractive features ... that will help keep inflation expectations better anchored and that makes it more easy to actually recover from an economic downturn. So that is one thing to look at.

    Another thing to look at is should we have a range for the inflation rate rather than just a 2 per cent target? I think the 2 per cent objective is a little bit overly precise. I think almost never will actually be right spot on the 2 per cent objective. It would be worth at least evaluating whether a range might be a more appropriate way to communicate how well we want to do, or how well we think it is feasible to do in terms of our inflation target. 

    Q: A range from 1 to 3 [per cent]? 

    A: Let’s say from 1.5 to 2.5 [per cent]. The idea would be when you are at 1.5 to 2.5 [per cent] you are not very concerned. It is pretty close to your definition of price stability. But if you get outside of that range on either side you become more concerned. That would be something worthy of evaluating.

    Moving from a 2 per cent inflation target to a 4 per cent inflation target: I personally think that is a bridge too far for two reasons. Number one the mandate for us is not set by the Fed it is set by Congress, and Congress has said price stability. I think it is very hard to pretend that 4 per cent inflation is consistent with price stability. And two if you actually had a 4 per cent inflation target it would start to distort economic decision-making.  Think about it: at 2 per cent inflation the price level doubles every 35 years. At 4 per cent inflation it doubles twice as fast. That then really has consequences for retirees and businesses and investors. So I think I would be at this point at least pretty sceptical of the wisdom of moving to a higher inflation target.

    ... 

    Q: The Fed is supposed to be targeting 2 per cent currently, at any given time; is there any argument that you could target 2 per cent over the course of a cycle? That would get you towards this idea of a price level target without formally moving to a price level target, because you are looking at an average over time? 

    A: You could potentially have something that was sort of a soft version of price level targeting. The problem with price level targeting if you actually move to that formally is it raises a lot of questions. If you overshoot inflation how quickly do you have to bring inflation back to your 2 per cent average. If you had a more general thing that our goal is to achieve 2 per cent inflation over the medium to longer run that could be maybe a softer version of price level targeting, without having to describe all the nuances. One of the challenges of price level targeting is how do you communicate it? And the second challenge of price level targeting is if you do the symmetric version it is attractive when you undershoot inflation that you want to overshoot inflation. It is not so attractive that when you overshoot inflation you want to undershoot inflation. You want to undershoot inflation then the zero lower bound problem reasserts itself. That is really the problem of symmetric price level targeting. You are comfortable overshooting after you undershoot, you are not very comfortable if you have overshot to undershoot.

  • 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.

    [ January 18, 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.

  • John Williams It would be a great honor to serve as vice-chairman of the Fed.

    [ January 18, 2018 ]

    John Williams, president of the Federal Reserve Bank of San Francisco, is gunning for one of the top positions in central banking, saying it would be a “great honour” to serve as number two under Jay Powell, the incoming chair.

    The regional Fed president said he would “welcome such an opportunity to contribute to the important mission of the Fed”, when asked by the Financial Times if he would be up for a move to Washington to serve as vice-chairman of the Fed’s Board of Governors.

    ...

    Mr Williams suggested the US outlook is as good as it has been for a number of years. The global economy had hit a turning point where expansion is on firmer foundations not only in the US but in Europe and elsewhere around the world, he said. That combined with some fiscal stimulus is “giving you a tailwind”, and could reduce the disinflationary pressures worldwide. 

    “All those forces provide me with greater confidence that the US economy is going to continue to grow actually somewhat above trend this year and is on a very good footing in terms of growth,” Mr Williams said. “That supports again my confidence that we will see inflation move gradually back to 2 per cent.”

    With equity markets continuing to surge, Mr Williams said one of the desirable side-effects of continuing to gradually lift rates is that higher borrowing costs could reduce some of the incentive for investors to pay excessively high prices for assets.

    “The worry you have is not about where they are today,” he said of asset prices. “Obviously we don’t want to in any way contribute to animal spirits or another kind of psychology that leads people to kind of lose track of those fundamentals and go crazy and pay whatever — speculate.”

  • Robert S. Kaplan I feel strongly and have a lot of conviction that the base case should be three moves for this year. And if I’m wrong, it could even potentially be more than that.

    [ January 17, 2018 ]

    I feel strongly and have a lot of conviction that the base case should be three moves for this year. And if I’m wrong, it could even potentially be more than that. But I certainly think it makes sense to have three removals of accommodation, and we’ll see how the economy unfolds during the year.

    I’d say I have a lot more conviction starting this year that three should be the number.

  • Eric Rosengren I would also suggest that the optimal inflation rate is not likely to remain constant over time...  In my view, adopting an inflation range that allows for movement in the effective medium-run inflation goal might be a helpful addition to the Fed’s monetary policy framework...  If we set the range to – for example – 1.5 to 3.0 percent ...this would represent a set of inflation outcomes that are similar to those the U.S. has experienced over the past 20 years.

    [ January 12, 2018 ]

    I would also suggest that the optimal inflation rate is not likely to remain constant over time. An alternative, which would recognize that the inflation target should not necessarily be constant, is an inflation range with an adjustable inflation target. Within this framework, one could think of our inflation goal as defined by two components: A range of inflation rates that policymakers would find acceptable across many economic circumstances, and a medium-term goal within that range that policymakers would set, perhaps year by year, depending on specific economic circumstances.

    In my view, adopting an inflation range that allows for movement in the effective medium-run inflation goal might be a helpful addition to the Fed’s monetary policy framework.  An inflation range that allows some movement in the inflation target, depending on economic fundamentals, would be treating the Fed’s inflation goal more like the natural rate of unemployment, where we recognize that the natural rate will shift over time with demographic and other workforce characteristics.

    Of course, the advantages of greater inflation target flexibility would likely be partly offset by some costs. For instance, it is likely that such flexibility would generate more uncertainty about inflation in the medium to long run, since we cannot know for sure how long productivity and demographic trends would persist.7 However, if we set the range to – for example – 1.5 to 3.0 percent, and were successful in keeping inflation mostly in that range, this would represent a set of inflation outcomes that are similar to those the U.S. has experienced over the past 20 years.

    ...

    One way to avoid periods of prolonged low interest rates would be to alter the inflation target in response to changes in our estimates of real interest rates – estimates that have been changing of late. This would make inflation, like the natural unemployment rate, a target that could vary over time. If, for example, the monetary policy framework set an inflation range of, say 1.5 to 3.0 percent, the FOMC could vary its medium-term inflation target to be high, low, or in the middle of the range depending on economic factors that the Committee could determine at the beginning of each year. For example, in the current environment, with low population growth and low productivity growth, policy could move even more gradually to remove accommodation, and allow inflation to be somewhat higher in its range. Should the labor force or productivity grow more quickly, the Committee could seek to gradually reduce the inflation target within its range.

    ...

    An inflation range with an adjustable medium-run inflation goal is one way to address such concerns, but there are a variety of alternative frameworks also worth considering.18 In my view, we are approaching a time when a comprehensive reconsideration of the monetary policy framework is likely warranted, given the experience of the past 10 years. Any change we make should be designed to provide policymakers with the flexibility to set monetary policy appropriately as key features of the economy change, as they have repeatedly over U.S. economic history.

  • Patrick Harker [An] issue I’m watching is the yield curve, and I’m sure I’m not alone in this room. My assessment is that the worries so far have been inflated.

    [ January 12, 2018 ]

    [An] issue I’m watching is the yield curve, and I’m sure I’m not alone in this room. My assessment is that the worries so far have been inflated.

  • William C. Dudley Over the longer term, however, I am considerably more cautious about the economic outlook.  Keeping the economy on a sustainable path may become more challenging.  While the recently passed Tax Cuts and Jobs Act of 2017 likely will provide additional support to growth over the near term, it will come at a cost...  While this does not seem to be a great concern to market participants today, the current fiscal path is unsustainable.

    [ January 11, 2018 ]

    Broadly speaking, the prospects for continued economic expansion in 2018 look reasonably bright.  The economy is likely to continue to grow at an above-trend pace, which should lead to a tighter labor market and faster wage growth.  Under such conditions, I would expect the inflation rate to drift higher toward the FOMC’s 2 percent long-run objective.

    Over the longer term, however, I am considerably more cautious about the economic outlook.  Keeping the economy on a sustainable path may become more challenging.  While the recently passed Tax Cuts and Jobs Act of 2017 likely will provide additional support to growth over the near term, it will come at a cost.  After all, there is no such thing as a free lunch.  The legislation will increase the nation’s longer-term fiscal burden, which is already facing other pressures, such as higher debt service costs and entitlement spending as the baby-boom generation retires.  While this does not seem to be a great concern to market participants today, the current fiscal path is unsustainable.  In the long run, ignoring the budget math risks driving up longer-term interest rates, crowding out private sector investment and diminishing the country’s creditworthiness.  These dynamics could counteract any favorable direct effects the tax package might have on capital spending and potential output.

  • Robert S. Kaplan We want to avoid a situation where we have such an overheating that we’re playing catch up.

    [ January 10, 2018 ]

    “We want to avoid a situation where we have such an overheating that we’re playing catch up,” Kaplan said at a business event. The cuts are in part a concern, he said, “because I think debt levels of the country are unsustainable.”

  • Charles L. Evans “I think we have to be mindful of the fact that as we have all repriced real interest rates downwards that’s going to find its way into lower long term interest rates,” he told reporters. “We’ve been increasing short-term rates; it’s natural then almost mechanically for there to be a flattening of it.”

    [ January 10, 2018 ]

    “I don’t see any evidence of inflation moving up really fast, or even moving up enough,” Evans told reporters Wednesday after speaking in Lake Forest, Illinois, where he disclosed that at the Dec. 12-13 policy meeting he thought “it would be good to sort of put off the increases until about the middle of this year just to make sure the inflationary concerns resolve themselves.”

  • Raphael Bostic From Bloomberg: Bostic said his base case for 2018 was for two or three rate increases.

    [ January 8, 2018 ]

    Bostic said his base case for 2018 was for two or three rate increases, slightly below the median of three rate increases expected by his colleagues.

  • Loretta J. Mester I probably have one more (hike than the consensus) or a bit steeper path just because I think growth is picking up a little bit.

    [ January 5, 2018 ]

    Asked in an interview whether she agreed with the central bank’s median forecast for three rate rises this year, she said she was “about” in line. “I probably have one more (hike than the consensus) or a bit steeper path just because I think growth is picking up a little bit,” she said, adding she expects unemployment, now 4.1 percent, to settle around 4.75 percent.

  • Patrick Harker My own view is that two rate increases are likely to be appropriate for 2018.

    [ January 5, 2018 ]

    Inflation continues to run below target, not just in the U.S. but in countries across the globe. Domestically, I expect inflation will run a bit above target in 2019 and come down to target the following year, but I am more hesitant in this view than I am on economic activity. If soft inflation persists, it may pose a significant problem, which I’ll get to shortly.

    For that reason, my own view is that two rate increases are likely to be appropriate for 2018.

    Of course, I’ll continue to monitor the data as they roll in, but that’s the view as we start out the new year.

  • James Bullard We’ve really made no progress in the last two years toward our inflation target.

    [ January 5, 2018 ]

    We’ve really made no progress in the last two years toward our inflation target.

  • James Bullard A lot of good things were done in this tax bill… I do hold out the possibility that the tax bill will unleash a lot of investment in the U.S. and you will then get an outsized effect.

    [ January 4, 2018 ]

    “A lot of good things were done in this tax bill,” said Bullard, who endorsed the alignment of U.S. corporate taxes closer to developed world norms and said he felt that raising the standard deduction would weaken the constituencies behind itemized tax breaks that can distort economic decisions. “I do hold out the possibility that the tax bill will unleash a lot of investment in the U.S. and you will then get an outsized effect.”

    Bullard said his “base case” was for only a modest increase in capital spending, and a possible shift in the economy’s long-term potential growth by a few tenths of a percentage point -- not a dramatic change for the near term but important over the long run.

    A lot of good things were done in this tax bill… I do hold out the possibility that the tax bill will unleash a lot of investment in the U.S. and you will then get an outsized effect.