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Recent FedSpeak Highlights

  • Jeffrey Lacker I think there's a danger of inflation becoming entrenched at the level it is now with core inflation well over two and I think that most people and I myself personally would like to see it down around one-and-a-half percent.

    [ August 30, 2006 ]

    I think there's a danger of inflation becoming entrenched at the level it is now with core inflation well over two and I think that most people and I myself personally would like to see it down around one-and-a-half percent..

    Right now it's difficult at all times to get a hand on where people in the economy generally expect inflation to be. But right now I think there's, you know, a sense that inflation expectations are contained but having said that, there's a dispersion. There's, you know, a range of view about how rapidly inflation will come back down.
        The longer we let inflation remain, core inflation, remain where it is I think the more likely it is that expectations collapse on core inflation remaining about where it is now rather than declining as I would like to see it decline.
         So that's what I mean by becoming entrenched, becoming firmly lodged in the public's mind as an expectation that that's the inflation rate we're going to tolerate and I think that would be a mistake.

  • Janet L. Yellen It appears to me that the federal funds rate currently lies in a vicinity tht is roughly appropriate for the Fed to attain its key objectives over the medium run.

    [ July 30, 2006 ]

    It appears to me that the federal funds rate currently lies in a vicinity that is roughly appropriate for the Fed to attain its key objectives over the medium run...

    In the present circumstances, I would consider it appropriate for the actual rate to be a bit above the neutral rate—in other words, I'd like it to be modestly restrictive—to promote price stability, especially given that the economy may be operating with labor and product markets that are a bit on the tight side.

  • Susan Bies There's a variety of views on the FOMC, but everyone agrees we're getting closer to the stopping point. 

    [ April 13, 2006 ]

    There's a variety of views on the FOMC, but everyone agrees we're getting closer to the stopping point.  And that's why we're so much focused on incoming data and how that's changing our outlook to make the call on when we're actually there.

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    Community Leaders Luncheon
  • Donald Kohn Overshooting is something we are very aware of as a risk in policy today. 

    [ April 13, 2006 ]

    [Fed officials] are trying to pick up early signs that the rate of economic growth might be cooling off, and we are also very alert to what is happening to price inflation...  Overshooting is something we are very aware of as a risk in policy today. 

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    Source:

    http://www.federalreserve.gov/boarddocs/speeches/2006/20060413/default.htm

    Venue:

    Bankers and Business Leaders Luncheon
  • William Poole I think that the market is reading the current numbers in a very sensible way.

    [ April 7, 2006 ]

    I think that the market is reading the current numbers in a very sensible way. And what I think we are - need to pay attention to are not little nuances around the current numbers but rather the bigger things that may come along and surprise us. When everything is coming in on-track, no surprises, there really shouldn't be very much to talk about. We need to be thinking ahead to surprises.

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    Bloomberg TV
  • Ben Bernanke The surge in energy prices since late 2003 has significantly reduced the purchasing power of households and decreased the profits of non-energy firms, thereby restraining both consumer spending and business investment.

    [ April 4, 2006 ]

    The surge in energy prices since late 2003 has significantly reduced the purchasing power of households and decreased the profits of non-energy firms, thereby restraining both consumer spending and business investment. By rough estimate, these increases in energy prices have probably reduced real GDP growth between 1/2% and 1% per year over this period. Although some of this loss in output will be made up in the longer run as the U.S. economy adjusts to higher energy prices, the level of productivity is likely to remain lower than it otherwise would have been, as firms use less energy per worker.

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    Source:

    http://www.usatoday.com/money/economy/fed/2006-04-18-fed-usat_x.htm?POE=MONISVA

    Venue:

    Letter to Congressman J. Gresham Barrett
  • Thomas Hoenig I would expect that employment will grow by between 1.5 million and 2 million jobs in 2006. That translates into an increase of 125,000 to 167,000 jobs per month.

    [ April 4, 2006 ]

    My view is similar to the consensus of private sector forecasters. I would expect growth of around 3 ½ percent (Q4/Q4) for 2006, which is just slightly above most estimates of trend GDP growth. That said, growth in the first quarter may come in well above 3 ½ percent, as the economy rebounds from the sluggish fourth quarter. But over the course of the year, I would expect to see GDP decelerate to around its trend growth rate...

    The solid growth forecast for the economy also should translate into steady growth in employment. The increases will be somewhat less than employment gains seen in the past two years due to two factors.  First, as growth slows and converges toward the economy’s trend growth rate, fewer additional workers will be needed. And second, strong productivity growth over the past few years is expected to continue, suggesting that the existing workforce will be able to produce a sizeable portion of the projected increase in output.  Based on these factors, I would expect that employment will grow by between 1.5 million and 2 million jobs in 2006. That translates into an increase of 125,000 to 167,000 jobs per month.

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    Source:

    http://www.kansascityfed.org/SPCH&BIO/HoenigKCForum0406.pdf

    Venue:

    Rolling Hills Museum and Conference Center
  • Ben Bernanke Although macroeconomic forecasting is fraught with hazards, I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come, for several reasons.

    [ March 20, 2006 ]

    Although macroeconomic forecasting is fraught with hazards, I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come, for several reasons. First, in previous episodes when an inverted yield curve was followed by recession, the level of interest rates was quite high, consistent with considerable financial restraint. This time, both short- and long-term interest rates--in nominal and real terms--are relatively low by historical standards.

    Second, as I have already discussed, to the extent that the flattening or inversion of the yield curve is the result of a smaller term premium, the implications for future economic activity are positive rather than negative.

    Finally, the yield curve is only one of the financial indicators that researchers have found useful in predicting swings in economic activity. Other indicators that have had empirical success in the past, including corporate risk spreads, would seem to be consistent with continuing solid economic growth. In that regard, the fact that actual and implied volatilities of most financial prices remain subdued suggests that market participants do not harbor significant reservations about the economic outlook.

  • Ben Bernanke A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money. 

    [ November 20, 2002 ]

    A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.  [18]

    [18] A tax cut financed by money creation is the equivalent of a bond-financed tax cut plus an open-market operation in bonds by the Fed, and so arguably no explicit coordination is needed. However, a pledge by the Fed to keep the Treasury's borrowing costs low, as would be the case under my preferred alternative of fixing portions of the Treasury yield curve, might increase the willingness of the fiscal authorities to cut taxes.

  • Alan Greenspan In an economy that already has lost some momentum, one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending.

    [ December 5, 2000 ]

    Nonetheless, in the face of the energy price spike and the erosion of optimism in financial markets, consumer confidence, or sentiment, appears to be holding up reasonably well to date, though there have been some mixed signals of late...

    ...[I]n an economy that already has lost some momentum, one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending.

     

  • Paul Volcker In a way, I suppose full confidence in a simple, unified view of economic policy is a comforting thing: a kind of security blanket in an uncertain world. But Alfred North Whitehead, in a different context, once pointed to the danger: “There are no whole truths; all truths are half truths. It is trying to treat them as whole truths that plays the devil.”

    [ September 16, 1976 ]

    Back in the days when I was learning economics and central banking, the General Theory had cast fresh light on old problems. The intellectual contributions were immense. But popularized, bowdlerized, and pressed to extremes, it lost fashion for good reason.

    The monetarists – emphasizing old truths in modern clothing – have provided a large service in redressing the balance. It is in pressing the point to an extreme that the danger lies – the impression that only money matters and that a fixed rate of reserve expansion can answer most of the complicated problems of economic policy.

    In a way, I suppose full confidence in a simple, unified view of economic policy is a comforting thing: a kind of security blanket in an uncertain world. But Alfred North Whitehead, in a different context, once pointed to the danger: “There are no whole truths; all truths are half truths. It is trying to treat them as whole truths that plays the devil.”

    He overstated the case. The practical man cut adrift from our sense of what is the greater truth – distinguishing, if you will, the one-eighth truths from the seven-eighths truths – will soon lose his way. But in assessing those truths, he can never afford to lose sight of the messy reality of the world in which we live.

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

    [ October 12, 1714 ]

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