wricaplogo

Keyword Search

RETURN

Categories

Recent FedSpeak Highlights

  • Charles Plosser Somebody asked me today was I open to rate cuts, further rate cuts in the future. Absolutely, I'm open to those.

    [ January 8, 2008 ]

    Somebody asked me today was I open to rate cuts, further rate cuts in the future. Absolutely, I'm open to those.

    From press Q&A session, as reported by Market News International

  • Dennis Lockhart The negatives in our economy may be gaining momentum. I think these circumstances call for policymakers to be prepared to respond pragmatically to whatever developments arise. 

    [ January 7, 2008 ]

    At this juncture, the times present even greater uncertainty than usual. The negatives in our economy may be gaining momentum. I think these circumstances call for policymakers to be prepared to respond pragmatically to whatever developments arise. 

  • Charles Plosser

    I like the way we came out in the last statement, similar to the statement in September: an agnostic view of the balance of risks. I have some concerns about our use of this balance of risks language. It has served a purpose at times but can also put the committee in an awkward position. Markets often use our balance of risks to infer something about what they think the path of the funds rate is going to be and that is not I believe the best way to do business. I would like us to be more
    explicit about how the evolution of the economy impacts our decisions, rather than signaling the path of the funds rate.

    The circumstances have focused my attention on this language issue, particularly in the balance of risks and I suspect people are struggling right now with, `Okay, maybe we have to think through this a little more carefully than we had before.’ In the current circumstance it makes sense [not to state the balance of risks] and I’m thinking about what else can we say that might improve our communications.

    [ December 16, 2007 ]
  • Timothy Geithner We will continue to examine ways to adapt our instruments as market conditions evolve.  We will do so in close cooperation with other central banks, as indeed we have since August.  And we will do so in the tradition of pragmatism and flexibility that has been one of the defining features of the central bank of the United States.

    [ December 13, 2007 ]

    The Federal Reserve Act gives us broad authority to act in response to these types of conditions. We will continue to examine ways to adapt our instruments as market conditions evolve.  We will do so in close cooperation with other central banks, as indeed we have since August.  And we will do so in the tradition of pragmatism and flexibility that has been one of the defining features of the central bank of the United States.

  • William Poole There is a sense in which a Fed put does exist. However, those who believe that the Fed put reflects unwise monetary policy misunderstand the responsibilities of a central bank. The basic argument is very simple: A monetary policy that stabilizes the price level and the real economy cannot create moral hazard because there is no hazard, moral or otherwise.

    [ November 30, 2007 ]

    There is a sense in which a Fed put does exist. However, those who believe that the Fed put reflects unwise monetary policy misunderstand the responsibilities of a central bank. The basic argument is very simple: A monetary policy that stabilizes the price level and the real economy cannot create moral hazard because there is no hazard, moral or otherwise. Nor does monetary policy action designed to prevent a financial upset from cascading into financial crisis create moral hazard. Finally, the notion that the Fed responds to stock market declines per se, independent of the relationship of such declines to achievement of the Fed’s dual mandate in the Federal Reserve Act, is not supported by evidence from decades of monetary history.

    More From:

    See Also:

    Source:

    http://www.stls.frb.org/news/speeches/2007/11_30_07.html

    Venue:

    Cato Institute
  • Charles Plosser Asked whether the Fed would consider other liquidity measures to stabilize financial markets, such as narrowing the spread in the discount rate, Plosser said "that's certainly something one could entertain."

    [ November 30, 2007 ]

    Asked whether the Fed would consider other liquidity measures to stabilize financial markets, such as narrowing the spread in the discount rate, Plosser said "that's certainly something one could entertain."

    Plosser acknowledged there was "perhaps a stigma" attached to banks borrowing from the Fed's discount window, which has limited borrowing.  But he said the act of cutting that rate in August itself had a positive effect on markets.

    As reported by Dow Jones

    More From:

    See Also:

    Venue:

    Federal Reserve Bank of Philadelphia
  • Ben Bernanke We at the Federal Reserve will have to remain exceptionally alert and flexible as we continue to assess how best to promote sustainable economic growth and price stability in the United States.

    [ November 29, 2007 ]

    In sum, as I have indicated, we will be receiving a good deal of relevant information in the coming days. In making its policy decision, the Committee will have to judge whether the outlook for the economy or the balance of risks has shifted materially. In doing so, we will take full account of the implications for the outlook of both the incoming economic data and the ongoing developments in the financial markets.

    Economic forecasting is always difficult, but the current stresses in financial markets make the uncertainty surrounding the outlook even greater than usual. We at the Federal Reserve will have to remain exceptionally alert and flexible as we continue to assess how best to promote sustainable economic growth and price stability in the United States.

  • Donald Kohn To be sure, lowering interest rates to keep the economy on an even keel when adverse financial market developments occur will reduce the penalty incurred by some people who exercised poor judgment.  But these people are still bearing the costs of their decisions and we should not hold the economy hostage to teach a small segment of the population a lesson.

    [ November 28, 2007 ]

    Central banks seek to promote financial stability while avoiding the creation of moral hazard.  People should bear the consequences of their decisions about lending, borrowing, and managing their portfolios, both when those decisions turn out to be wise and when they turn out to be ill advised.  At the same time, however, in my view, when the decisions do go poorly, innocent bystanders should not have to bear the cost. 

    ...

    To be sure, lowering interest rates to keep the economy on an even keel when adverse financial market developments occur will reduce the penalty incurred by some people who exercised poor judgment.  But these people are still bearing the costs of their decisions and we should not hold the economy hostage to teach a small segment of the population a lesson.

     

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/speech/kohn20071128a.htm

    Venue:

    Council on Foreign Relations
  • Charles L. Evans We clearly must be vigilant about these risks to economic growth. However, overly accommodative liquidity provision could endanger price stability.

    [ November 27, 2007 ]

    We clearly must be vigilant about these risks to economic growth. However, overly accommodative liquidity provision could endanger price stability, which is the second component of the dual mandate. After all, inflation is a monetary phenomenon. Indeed, one of the many reasons for the Fed's commitment to low and stable inflation is that inflation itself can destabilize financial markets.

    ...

    That is, the Fed must adjust the stance of policy to guard against the risk of events that may have low probability but, if they did occur, would present an especially notable threat to sustainable growth or price stability...  But while the risk is still present of notably weaker-than-expected overall economic activity, given the policy insurance we have put in place I don't see this as likely.

  • Charles Plosser Arbitrarily lowering interest rates or providing liquidity to the market does not provide the answers the market seeks. Indeed, in some circumstances, lowering interest rates may prolong the painful process of price discovery.

    [ November 27, 2007 ]

    It is important to recognize that the Federal Reserve cannot resolve this price discovery problem. The markets will have to figure this out.  Arbitrarily lowering interest rates or providing liquidity to the market does not provide the answers the market seeks.  Indeed, in some circumstances, lowering interest rates may prolong the painful process of price discovery.

    ...

    In the current environment, providing insurance through a reduction in the fed funds rate creates its own set of additional risks. It may exacerbate moral hazard problems as I suggested earlier.

  • Randall KrosznerA sequence of data releases consistent with the rough patch for economic activity that I expect in coming months would not, by themselves, suggest to me that the current stance of monetary policy is inappropriate. 

    Note:  Some hours after Gov. Kroszner suggested that further rate cuts might not be necessary, the chairman of the Senate Banking Committee, Chris Dodd,  told the press that he might not act on Kroszner's confirmation for a full term as governor until after the 2008 elections.

    [ November 16, 2007 ]

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/speech/kroszner2007116a.htm

    Venue:

    Institute of International Finance
  • William Poole [I]f the fourth quarter comes in exactly as anticipated, and given that there's already been 75 basis points of easing, and given that we can't affect the fourth quarter anyway - the fourth quarter is going to be irrelevant to the December decision unless it tells us something about next year we don't already know.

    [ November 16, 2007 ]

    [I]f the fourth quarter comes in exactly as anticipated, and given that there's already been 75 basis points of easing, and given that we can't affect the fourth quarter anyway - the fourth quarter is going to be irrelevant to the December decision unless it tells us something about next year we don't already know.

     

    More From:

    See Also:

    Venue:

    Dow Jones Newswires Interview
  • Thomas Hoenig So when I say, and I always do in my speeches, it is a matter of waiting watching and seeing, I really mean it this time.

    [ November 15, 2007 ]

    At present, Hoenig said he is "not at all opposed to necessary action either way." 

    "So when I say, and I always do in my speeches, it is a matter of waiting watching and seeing, I really mean it this time," he said.

    As reported by MarketWatch

  • Dennis Lockhart If I were to use one word to characterize our current economic circumstances, that word would be uncertain." Much of this uncertainty relates to the potential depth

    [ November 7, 2007 ]

    If I were to use one word to characterize our current economic circumstances, that word would be "uncertain." Much of this uncertainty relates to the potential depth, length, and impact of the housing downturn and potential flow-back to Main Street from the turbulence we have seen on Wall Street.

  • 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.