wricaplogo

Keyword Search

RETURN

Categories

Recent FedSpeak Highlights

  • Frederic Mishkin I think that the cumulative policy easing the FOMC put in place at its past two meetings reduced significantly the downside risks to growth so that those risks are now balanced by the upside risks to inflation.

    [ November 5, 2007 ]

    In voting to ease policy, I carefully considered the effect of that decision on our other objective--price stability. I reasoned that the anticipated softening of economic growth and perhaps the emergence of some slack in the labor market might reduce those pressures, and I judged that a cut of 25 basis points in the target federal funds rate would not materially alter that modal outlook. However, I recognized the risk that, even if readings on core inflation have improved modestly this year, recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. Consequently, in considering appropriate future adjustments to policy, I will monitor inflation developments carefully.

    Overall, I think that the cumulative policy easing the FOMC put in place at its past two meetings reduced significantly the downside risks to growth so that those risks are now balanced by the upside risks to inflation. In these circumstances, I will want to carefully assess incoming data and gauge the effects of financial and other developments on economic prospects before considering further policy action. As always, my colleagues on the FOMC and I will act to foster our dual objectives of price stability and sustainable economic growth.

  • Charles L. Evans To me, the uncertainties about how financial conditions might evolve and affect the real economy mean that risk management considerations have an important role in the current policy environment.

    [ October 22, 2007 ]

    To me, the uncertainties about how financial conditions might evolve and affect the real economy mean that risk management considerations have an important role in the current policy environment. The cutback in nonconforming mortgage originations and the continued high level of inventories of unsold homes will result in further weakness in housing markets. Under one scenario, the effects on overall growth will be fairly isolated to declines in residential construction similar to our experience in 2006 and early 2007. However, there is a less benign possibility. Housing demand and prices could weaken a good deal more than we expect either because a new shock hits the sector or because we have underestimated the weakness already in train. A more pronounced downturn could weigh more heavily on consumer spending. In addition, further delinquencies and foreclosures could add to the problems with mortgage-backed securities. This, in turn, could generate further adverse effects on financial conditions that support economic activity. Together, such events would pose a more serious downside risk to growth. I want to emphasize that I do not see this extreme outcome as likely. But it is one of those high cost outcomes that we should guard against.

  • Thomas Hoenig The U.S. economy still has a lot going for it...  I want to also remain alert as we move through this tender time.

    [ October 17, 2007 ]

    Federal Reserve Bank of Kansas City President Thomas Hoenig said he's ``optimistic'' about the U.S. economy, though it's important to remain ``alert'' because of risks posed by the housing slump.

    ``The U.S. economy still has a lot going for it,'' Hoenig said in a speech yesterday in Tulsa, Oklahoma, citing continued job and consumer spending growth and gains in exports, helped by a weaker dollar. At the same time, ``I want to also remain alert as we move through this tender time,'' he said.

    As reported by Bloomberg News

    More From:

    Venue:

    Federal Reserve Bank of Kansas City
  • Ben Bernanke The Committee chose to cut its target for the federal funds rate by 50 basis points at the September meeting... The risks to inflation from this action seemed acceptable, especially as the Committee was prepared to reverse the policy easing if inflation pressures proved stronger than expected.

    [ October 15, 2007 ]

    [T]he Committee chose to cut its target for the federal funds rate by 50 basis points at the September meeting. This action was intended to help offset the tightening of credit conditions resulting from the financial turmoil. Risk-management considerations also played a role in the decision, given the possibility that the housing correction and tighter credit could presage a broader weakening in economic conditions that would be difficult to arrest. By doing more sooner, policy might be able to forestall some part of the potential adverse effects of the disruptions in financial markets. As most of the meeting participants saw growth likely to run below trend for a while and with the incoming inflation data on the favorable side, the risks to inflation from this action seemed acceptable, especially as the Committee was prepared to reverse the policy easing if inflation pressures proved stronger than expected.

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/speech/bernanke20071015a.htm

    Venue:

    Economic Club of New York
  • Donald Kohn I thought that economic performance would be better served by the Federal Reserve taking its chances on responding too much, or too rapidly, to the turmoil in financial markets rather than acting too little, or too slowly...  With inflation expectations seemingly well anchored, I believed that we would be able to offset the cut in the federal funds rate--if it turned out to be larger than needed--in time to preserve price stability.

    [ October 5, 2007 ]

    In addition, I thought that economic performance would be better served by the Federal Reserve taking its chances on responding too much, or too rapidly, to the turmoil in financial markets rather than acting too little, or too slowly.  Sluggish or inadequate easing risked a weaker real economy that might cause lenders to pull back even more, leading to a deteriorating situation that could prove difficult to reverse.  With the news on inflation relatively favorable of late and with inflation expectations seemingly well anchored, I believed that we would be able to offset the cut in the federal funds rate--if it turned out to be larger than needed--in time to preserve price stability.

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/speech/kohn20071004a.htm

    Venue:

    Greater Philadelphia Chamber of Commerce
  • Charles Plosser If inflation begins to creep up or expectations of future inflation rise in the coming months – which is a risk given our decision to cut rates – the outlook will be affected and policy may have to be adjusted.

    [ September 25, 2007 ]

    We will also have to remain vigilant on the inflation front. The reduction in the funds rate runs the risk of higher inflation and expected inflation in the future. While the inflationary signs this summer have been encouraging, I do not think we are in a position to be sanguine. If inflation begins to creep up or expectations of future inflation rise in the coming months – which is a risk given our decision to cut rates – the outlook will be affected and policy may have to be adjusted.

  • Donald Kohn Anchored inflation expectations ... permit central banks to respond more forcefully to output fluctuations. 

    [ September 21, 2007 ]

    Anchored inflation expectations damp the pass-through of supply-related price shocks.  They also permit central banks to respond more forcefully to output fluctuations.  Most significantly, the improved inflation performance has come with, not at the expense of, output stability.  Although a consensus has not formed on how much of the "Great Moderation" in the growth of real output can be attributed to monetary policy, everyone agrees that at least a portion of it can.

  • Ben Bernanke The Federal Open Market Committee lowered its target for the federal funds rate by 50 basis points ... to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time. 

    [ September 20, 2007 ]

    Earlier this week, [the] Federal Open Market Committee lowered its target for the federal funds rate by 50 basis points.  The action was intended to help forestall some of the adverse effects on the broader economy that might arise from the disruptions in financial markets and to promote moderate growth over time.  Recent developments in financial markets have increased the uncertainty surrounding the economic outlook.  The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/testimony/bernanke20070920a.htm

    Venue:

    Testimony to House Financial Services Committee
  • Ben Bernanke Term premiums appear recently to have risen from what may have been unsustainably low levels, in part because of the greater recent volatility in financial markets and investors' demands for increased compensation for risk-taking.

    [ September 11, 2007 ]

    Since I discussed these issues in March 2005, real interest rates have reversed some of their previous declines.  For example, in the United States, real yields on inflation-indexed government debt averaged 2.3 percent in 2006 as compared with 1.85 percent in 2004.  In the past few weeks, that yield has averaged about 2.4 percent.  Inflation-adjusted yields in other industrial countries have also started to move back up after falling in 2005.8      

    How does this all fit together?  My reading of recent developments is that although some of the details have changed, the fundamental elements of the global saving glut remain in place. ..

    Further increases in net capital flows from the developing economies, all else being equal, should have further depressed real interest rates around the world.  But as I have noted, in the past few years, real interest rates have moved up a bit.  This increase does not imply that the global saving glut has dissipated.  However, it does suggest that, at the margin, desired investment net of desired saving must have risen in the industrial countries enough to offset any increase in desired saving by emerging-market countries...

    Once again, however, I do not want to rely exclusively on this line of explanation for the behavior of long-term real interest rates, as other factors have no doubt been relevant.  In particular, term premiums appear recently to have risen from what may have been unsustainably low levels, in part because of the greater recent volatility in financial markets and investors' demands for increased compensation for risk-taking.

        

  • Frederic Mishkin Economic activity could be affected more severely in other sectors should heightened uncertainty lead to a broader pullback in household and business spending.  That scenario cannot, in my view, be ruled out, and I believe it poses an important downside risk to economic activity.

    [ September 10, 2007 ]

    As best we can tell thus far, the imprint of these developments on economic activity appears likely to be most pronounced in the housing sector.  However, economic activity could be affected more severely in other sectors should heightened uncertainty lead to a broader pullback in household and business spending.  That scenario cannot, in my view, be ruled out, and I believe it poses an important downside risk to economic activity.

  • Richard Fisher My guess is that a great deal of the potential dislocation resulting from corrective reactions to the subprime boom will be resolved by regulatory initiatives rather than by monetary policy.

    [ September 10, 2007 ]

    My guess is that a great deal of the potential dislocation resulting from corrective reactions to the subprime boom will be resolved by regulatory initiatives rather than by monetary policy...

    Any new regulations that might now be crafted to prevent future recurrences must be well thought out, for two reasons. First, financial institutions will quickly adapt to defeat any regulation that is poorly designed, morphing into new, vaccine-resistant strains. Second, heavy-handed regulations are sometimes worse than the disease against which they are meant to protect. I would be wary of any regulatory initiatives that interfere with market discipline and attempts to protect risk takers from the consequences of bad decisions for fear of creating a moral hazard that might endanger the long-term health of our economic and financial system simply to provide momentary relief.  

  • Dennis Lockhart Last Thursday, I said in a speech that I have not seen conclusive signs of weakness in the broader economy.  Friday's data, however, shows employment was beginning to soften back in June.  This news should be evaluated with recently positive reports in retail sales.

    [ September 10, 2007 ]

    "Last Thursday, I said in a speech that I have not seen conclusive signs of weakness in the broader economy,'' Lockhart, 60, said at an event sponsored by the Atlanta Business Chronicle. ``Friday's data, however, shows employment was beginning to soften back in June. This news should be evaluated with recently positive reports in retail sales.''    

    As reported by Bloomberg News

  • Charles Plosser I believe disruptions in financial markets can be addressed using the tools available to the Federal Reserve without necessarily having to make a shift in the overall direction of monetary policy.

    [ September 8, 2007 ]

    A change in monetary policy would be required if the outlook for the economy changes in a way that is inconsistent with the Fed’s goals of price stability and maximum sustainable economic growth. Certainly, standing here today, it is obvious that tighter credit conditions and disruptions in financial markets have increased the uncertainty surrounding our forecasts of the economy. The FOMC continues to monitor incoming data and other economic information for signs that these disruptions are having a broader impact on the economy. In my view, it will be very important to assess such information in light of the Fed’s commitment to achieving its long-run goals of price stability and sustainable economic growth.

  • Charles Plosser The Committee usually does not base its decision to change monetary policy on any one number, but instead assesses the cumulative impact of all incoming data for the outlook in light of its ultimate goals.

    [ September 8, 2007 ]

    As you are no doubt aware, the monthly statistics reported on the economy are very volatile and subject to revision. The FOMC works hard to differentiate those factors that may have only a temporary impact on the economy or inflation from those of a more sustained nature...

    The Committee looks at a variety of data and economic information in formulating its economic outlook. When information indicates that the outlook for economic growth and inflation has changed, one still has to ask whether it has changed enough to impede the achievement of the Fed’s goals of price stability and maximum sustainable economic growth. As I mentioned, the economy is remarkably resilient. One must also ask how much monetary policy can influence that forecast over the relevant time horizon. Thus the Committee usually does not base its decision to change monetary policy on any one number, but instead assesses the cumulative impact of all incoming data for the outlook in light of its ultimate goals.

  • Randall Kroszner I would like to reinforce remarks made last week by Chairman Bernanke on the recent turbulence in financial markets... If current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the broader economy.  And financial stress has not been limited just to mortgage markets, but has spread to other markets.

    [ September 6, 2007 ]

     I would like to reinforce remarks made last week by Chairman Bernanke on the recent turbulence in financial markets.  In the United States we have seen a fairly sharp downturn in housing markets, and in recent weeks there have been growing investor concerns about mortgage credit performance, particularly with subprime mortgages.  If current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the broader economy.  And financial stress has not been limited just to mortgage markets, but has spread to other markets.  In general, a shift in risk attitudes has interacted with heightened concerns about credit risks and uncertainty about how to evaluate those risks. 

  • Jeffrey Lacker If evidence arrives that we need a policy move, of course I will consider it and I will take that evidence seriously.  That evidence would be of the nature of information that alters the outlook for real spending and inflation.'

    [ September 3, 2007 ]

    ``If evidence arrives that we need a policy move, of course I will consider it and I will take that evidence seriously,'' he said in an interview with Reuters today. ``That evidence would be of the nature of information that alters the outlook for real spending and inflation.''

    ``If it lowers growth and real spending, that is going to warrant a lower path for real interest rates,'' Lacker said, adding the impact is `` very unclear.''

    As reported by Bloomberg News  

    More From:

    See Also:

    Venue:

    Reuters Interview
  • Ben Bernanke Developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy.

    [ August 31, 2007 ]

    It is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences of their financial decisions.  But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy.

    ...

    Well-functioning financial markets are essential for a prosperous economy… The Federal Reserve stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets...

    ...

    The Committee continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets.

  • Ben Bernanke As you know, the financial stress has not been confined to mortgage markets.

    [ August 31, 2007 ]

    As you know, the financial stress has not been confined to mortgage markets.

  • Jeffrey Lacker Financial market volatility, in and of itself, does not require a change in the target federal funds rate, in my view. Interest rate policy needs to be guided by the outlook for real spending and inflation. Financial turbulence has the potential to change the assessment of the appropriate rate if it induces a sufficient revision in growth or inflation prospects.

    [ August 21, 2007 ]

    Financial market volatility, in and of itself, does not require a change in the target federal funds rate, in my view. Interest rate policy needs to be guided by the outlook for real spending and inflation. Financial turbulence has the potential to change the assessment of the appropriate rate if it induces a sufficient revision in growth or inflation prospects.

  • William Poole It's premature to say that this upset in the market is changing the course of the economy in any fundamental way.  Obviously, there could be an impact, but we have to rely on some real evidence.

    [ August 15, 2007 ]

        William Poole, president of the Federal Reserve Bank of St. Louis, said there's no sign that the subprime-mortgage rout is harming the broader U.S. economy, and an interest-rate cut isn't yet needed.   ``I don't see any impact as yet on the real economy or on the inflation rate,'' he said in an interview in the bank's boardroom. ``Obviously, there could be an impact, but we have to rely on some real evidence.''
         Barring a ``calamity,'' there is no need to consider an emergency rate cut, Poole said. His comments were the first by a Fed official since the U.S. central bank joined counterparts in
    Europe and Asia to inject emergency funds after a surge in money-market rates. The Fed has added $71 billion of reserves in the past five trading days.
         Poole, 70, said businesses have maintained their hiring and investment plans and banks have sufficient capital to weather the credit-market turmoil. The St. Louis Fed chief stressed that the best course is for policy makers to assess the latest economic data when they next meet Sept. 18. The comments contrast with the certainty that traders put on a rate cut next month.   ``If the data confirm the market's view that the economy is sagging, we'll have to decide whether to share that view,'' said Poole, who votes on the rate-setting Federal Open MarketCommittee this year. He cited the monthly jobs, retail sales and industrial production reports as key gauges he'll be watching.

    As reported by Bloomberg News