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Recent FedSpeak Highlights

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

    [ June 22, 2017 ]

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

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

    [ June 20, 2017 ]

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

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

    [ June 19, 2017 ]

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

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

    [ June 19, 2017 ]

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

    ...

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

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

    [ June 16, 2017 ]

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

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

  • Janet L. Yellen The Committee would be prepared to resume reinvestments if a material deterioration in the economic outlook were to warrant a sizable reduction in the federal funds rate.

    [ June 14, 2017 ]

    [T]he Committee affirmed that changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy. In other words, the balance sheet is not intended to be an active tool for monetary policy in normal times. However, the Committee would be prepared to resume reinvestments if a material deterioration in the economic outlook were to warrant a sizable reduction in the federal funds rate. More generally, the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.

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    Venue:

    FOMC Chairman Post-Meeting Press Briefing
  • Janet L. Yellen The recent lower readings on inflation have been driven significantly by what appear to be one-off reductions in certain categories of prices, such as wireless telephone services and prescription drugs.  These price declines will, as a matter of arithmetic, restrain the 12-month inflation figures until the extraordinarily low March reading drops out of the calculation.

    [ June 14, 2017 ]

    The recent lower readings on inflation have been driven significantly by what appear to be one-off reductions in certain categories of prices, such as wireless telephone services and prescription drugs. These price declines will, as a matter of arithmetic, restrain the 12-month inflation figures until the extraordinarily low March reading drops out of the calculation. However, with employment near its maximum sustainable level and the labor market continuing to strengthen, the committee still expects inflation to move up and stabilize around 2 percent over the next couple of years, in line with our longer-run objective.

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    Venue:

    FOMC Chairman Post-Meeting Press Briefing
  • Janet L. Yellen So it’s that recognition [that the neutral real funds rate may have fallen] that causes people to think we might be better off with a higher inflation objective... This is one of our most critical decisions and one we are attentive to evidence and outside thinking. It’s one that we will be reconsidering at some future time.

    [ June 14, 2017 ]

    At the time that we adopted the 2 percent target—it was back in 2012—we had a very thorough discussion of the factors that should determine what our inflation
    objective should be. And, you know, I believe that was a well-thought-out decision...

    Now, we’ve learned a lot in the meantime, and assessments of the level of the neutral likely level, currently and going forward, of the neutral federal funds rate have changed and are quite a bit lower than they stood in 2012 or earlier years. And that means that the economy has the potential where policy could be constrained by the zero lower bound more frequently than at the time that we adopted our 2 percent objective. So it’s that recognition that causes people to think we might be better off with a higher inflation objective,

    That’s an important set—this is one of our most critical decisions and one we are attentive to evidence and outside thinking. It’s one that we will be reconsidering at some future time. And it’s important for our decisions to be informed by a wide range of views and research which is ongoing inside and outside the Fed.

    But a reconsideration of that objective needs to take account not only of benefits of a higher in—potential benefits of a higher inflation target, but also the potential costs that could be associated with it. It needs to be a balanced assessment.

    But I would say that this is one of the most important questions facing monetary policy around the world in the future, and we very much look forward to seeing research by economists that will help inform our future decisions on this.

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    Venue:

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

    [ June 1, 2017 ]

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

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

    [ May 30, 2017 ]

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

    ...

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

    ...

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

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

     

     

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    Source:

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

    Venue:

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

    [ May 30, 2017 ]

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

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

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

    [ May 26, 2017 ]

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

  • Charles L. Evans   I think there are some institutional tendencies that make it difficult for some central bankers to tolerate above-target inflation even for limited and controlled periods of time.  

    [ May 24, 2017 ]

     

    I think there are some institutional tendencies that make it difficult for some central bankers to tolerate above-target inflation even for limited and controlled periods of time.

     

  • Patrick Harker I can definitively say that [the normlization process] will be boring.

    [ May 23, 2017 ]

    There are different options under discussion, but we’re looking for a normalization process that is gradual and essentially on autopilot. If something happens, of course we’ll intervene, but we fundamentally want to push the start button and leave it to churn slowly away. We’ll still discuss the balance sheet in meetings, but if things are good, we’ll leave it to gradually unwind in the background.

    And we’ll let you know. I can say with absolute certainty that markets will get a heads up with a good amount of time.

    I can also definitively say that it will be boring. It will be the policy equivalent of watching paint dry. Fed presidents had a brief encounter with people finding us interesting over the past few years. Now we’re headed back to the natural state of things, where people try to avoid getting stuck next to us at dinner parties.

    The funds rate will be our primary monetary policy tool, and we’ll keep the unconventional ones in the arsenal in case we need to use them again, which I hope we won’t.

  • Charles L. Evans The symmetry of our inflation target is important — the central bank should be equally concerned about undershooting the target as overshooting. 

    [ May 22, 2017 ]

    The symmetry of our inflation target is important — the central bank should be equally concerned about undershooting the target as overshooting. If instead the public viewed our target as a ceiling, they likely would lower their expectations for average inflation over the longer run. These lower expectations would get built into lower nominal interest rates, and thus increase the risks of hitting the effective lower bound.

  • James Bullard Low unemployment readings are probably not an indicator of meaningfully higher inflation over the forecast horizon.

    [ May 19, 2017 ]

    Low unemployment readings are probably not an indicator of meaningfully higher inflation over the forecast horizon.

  • Patrick Harker I thinkJune should be a live meeting, for sure. We'll get more data between now and June. The only issue is the way inflation — where is it going? We're getting mixed signals on that right now. But I remain pretty confident we are close to our 2% target, and that if we don't see a deceleration of inflation but continued growth in inflation, I think June is a distinct possibility.

    [ May 16, 2017 ]

    One of my colleagues has an interesting phrase for describing the current mood of the economy: "awkward optimism." What he means by that is, if you look at all the surveys, whether it's consumer confidence, or business confidence, or whether it's at the national level, or our own manufacturing or nonmanufacturing business outlook — there's lots of confidence. But that confidence needs to translate into action, and there's still a little bit of hesitation. I want to be optimistic, I want to believe that we're going to get, say, tax policy change — but I'll wait...

    I think [June] should be a live meeting, for sure. We'll get more data between now and June. The only issue is the way inflation — where is it going? We're getting mixed signals on that right now. But I remain pretty confident we are close to our 2% target, and that if we don't see a deceleration of inflation but continued growth in inflation, I think June is a distinct possibility.

  • Patrick Harker I'm not completed wedded to thinking two more rate rises will be enough for this year.

    [ May 12, 2017 ]

    Things are pretty balanced, but there is a potential we have to accelerate the path" of rate increases if, for example, elected leaders were to find their way toward stimulative taxation and spending policies, or if wages were to heat up in a way that would drive inflation up more quickly than projected.

    "I'm not completed wedded" to thinking two more rate rises will be enough for this year, Mr. Harker said. 

    ...

    On the hiring front, Mr. Harker said, "We're looking at a labor market more or less at full health, with very little slack." He said what is now a 4.4% jobless rate is likely to ebb to 4.2% by the end of 2018.

    What is likely to be a 200,000 average monthly jobs gain this year should cool to a 100,000 average next year, he said, adding that slowing shouldn't be a problem. "To sustain a healthy economy, estimates of the ideal number range from about 70,000 to 100,000 a month to keep up with population growth," Mr. Harker said. 

  • Charles L. Evans If inflation is confidently headed back to 2 percent, I could see two more rate increases this year.  I could be okay with one as well if there are more uncertainties about the inflation outlook.

    [ May 12, 2017 ]

    “The one lingering difficulty, I would say, and it’s an important one, is that inflation pressures are still under-running our 2 percent objective in the U.S.,” Evans said Friday during a moderated discussion at an event in Dublin. “At the moment, I think the downside risks still predominate.”

    ...

    Evans said he would be "very surprised" if the Fed raises interest rates more than twice more this year.

    "If inflation is confidently headed back to 2 percent, I could see two more rate increases this year," Evans, a voting member of the policy-setting committee, said. "I could be okay with one as well if there are more uncertainties about the inflation outlook."

  • William C. Dudley Countries need to compete better, not compete less.

    [ May 11, 2017 ]

    Protectionism can have a siren-like appeal.  Viewed narrowly, it may be potentially rewarding to particular segments of the economy in the short term.  Viewed more broadly, it would almost certainly be destructive to the economy overall in the long term.

    Countries need to compete better, not compete less.  Trade barriers are a very expensive way to preserve jobs in less competitive or declining industries.  They blunt opportunities in export industries and they reduce the affordability of goods and services to households.  Indeed, such measures often backfire, resulting in harm to workers and diminished growth.