wricaplogo

Keyword Search

RETURN

Categories

Recent FedSpeak Highlights

  • Jerome H. Powell One of the clearest lessons from our most recent recession is that, when it comes to bank regulation and supervision, one size does not fit all. As we seek to promote safety and soundness and ensure consumer compliance, we increasingly tailor rules and supervisory approaches to the differing risks posed by institutions of different size and complexity.

    [ September 29, 2016 ]

    I think the key question for policymakers is whether the recent acceleration in the rate of decline in the number of small banks is primarily a structural change attributable to increasing economies of scale--or, perhaps more accurately, diseconomies of very small scale--or whether recent efforts by the FDIC and others to encourage more chartering of new banks, combined with a return to higher interest rates and stronger economic growth, will mitigate the decline in numbers. At this point, I think it is too soon to say.

    The Federal Reserve and the Conference of State Bank Supervisors began this conference three years ago in order to stimulate research on community banks, with the goal of improving our understanding of their condition and their important contributions to economic growth and prosperity. We plan to continue our own research efforts across the Federal Reserve System, as well as our efforts, through initiatives such as this conference, to encourage academics to focus their attention on community banks.

    Of course, the Federal Reserve's support for community banks goes well beyond research. One of the clearest lessons from our most recent recession is that, when it comes to bank regulation and supervision, one size does not fit all. As we seek to promote safety and soundness and ensure consumer compliance, we increasingly tailor rules and supervisory approaches to the differing risks posed by institutions of different size and complexity. This way, we can achieve our aims without creating undue regulatory burden. The Federal Reserve is committed to this approach to community bank oversight and to ensuring that new and existing regulations are not unduly burdensome for community banks.

  • Patrick Harker BLOOMBERG: As a modeler, would you get rid of the dot plot? HARKER: I’m not sure. I think it does provide value, and you need to think of lots of ways to communicate and be transparent. It does provide that. It’s really the interpretation of that particular dot plot, not for GDP or inflation, because people understand that’s our forecast. The one I worry about is the fed funds rate dot plot.

    [ September 29, 2016 ]

    BLOOMBERG: Do you think the central bank has a communications problem, particularly with Wall Street, because you have forecast a lot of interest rate moves that haven’t happened?

    HARKER: I think one of the fundamental problems we’ve had is that in the SEP – the dot plot – the path of the fed funds rate is often taken as some sort of commitment as opposed to our best guess or estimate of what will happen. And I think that’s been a communications issue, that it really isn’t saying this is exactly what we’re going to do. It’s saying given what we know today, this is our best estimate of where that will be, assuming that proper policy is followed.

    BLOOMBERG: As a modeler, would you get rid of the dot plot?

    HARKER: I’m not sure. I think it does provide value, and you need to think of lots of ways to communicate and be transparent. It does provide that. It’s really the interpretation of that particular dot plot, not for GDP or inflation, because people understand that’s our forecast. The one I worry about is the fed funds rate dot plot.

  • Dennis Lockhart “That phrase -- for the time being -- appeared in the statement suggesting, as I see it, that a change in policy could occur before long,”

    [ September 29, 2016 ]

    “That phrase -- for the time being -- appeared in the statement suggesting, as I see it, that a change in policy could occur before long,” Lockhart, who doesn’t vote on policy this year and will retire in early 2017, said Thursday in the text of a speech in Orlando, Florida. “I did support the consensus view that, before taking the next move, it makes sense to see a little more evidence of progress toward our statutory policy objectives.”

  • Esther L. George CNBC: And you still think at, so for example, a 1% funds rate, the economy would still be accommodative? The Fed would still be accommodative? GEORGE: Under my forecast it would still be accommodative and the economy can still grow.

    [ September 29, 2016 ]

    CNBC: And you still think at, so for example, a 1% funds rate, the economy would still be accommodative? The Fed would still be accommodative?

    GEORGE: Under my forecast it would still be accommodative and the economy can still grow.

  • Patrick Harker I tend to be in the camp of normalizing sooner rather than later.

    [ September 29, 2016 ]

    “I tend to be in the camp of normalizing sooner, rather than later,” he said Thursday in Dublin during an interview on Bloomberg Television with Michael McKee. He said the Fed was making progress toward its target for 2 percent inflation and “I am somewhat concerned about falling behind the curve,” he said.

    ...

    Harker, who became president of the Philadelphia Fed in July 2015 and will vote on policy next year, said that every FOMC meeting was “live” for a policy decision. “To take any meeting of the table is a mistake,” he said.

  • Patrick Harker “If things continue on the trajectory that I anticipate, December would be an appropriate time for a rate increase,”

    [ September 29, 2016 ]

    “If things continue on the trajectory that I anticipate, December would be an appropriate time for a rate increase,” Mr. Harker said. He was speaking to reporters after an address at an event hosted by the Global Interdependence Center, a U.S. think tank that promotes free trade.

  • Loretta J. Mester If we continue to delay even as we make further progress on our inflation goal and labor markets continue to tighten, we risk having to undertake a considerably steeper policy path later on. Such a strategy is inconsistent with what we have been communicating; it risks confusing the public about our policy rationale and undercutting the credibility of Fed communications. This would cause problems for future policymaking... In the face of evidence that the economy is on track to meet our goals over the medium run, sometimes being prudent means moving the policy rate up.

    [ September 28, 2016 ]

    I, and two of my FOMC colleagues, dissented from that decision [to hold rates steady], preferring to see a 25-basis-point increase in September.
    ...
    I view another small step on the gradual upward path as appropriate, not because I want to curtail the expansion, but because I believe gradually moving rates up as we continue to make progress on our goals will help prolong the expansion. It is also consistent with the policy communications we have been issuing for quite a while. I note that the gradual path I’m anticipating means that policy will remain accommodative for some time, continuing to lend support to the economic expansion going forward. The gradual path will also allow us to recalibrate policy over time as we gain more insights into the underlying structural aspects of the post-crisis economy.

    Now, one can always say it’s better to wait for more information before making a move, and a cautious approach has served us well so far during the expansion. But there are also risks to delaying for too long. If we continue to delay even as we make further progress on our inflation goal and labor markets continue to tighten, we risk having to undertake a considerably steeper policy path later on. Such a strategy is inconsistent with what we have been communicating; it risks confusing the public about our policy rationale and undercutting the credibility of Fed communications. This would cause problems for future policymaking. In addition, if we delay too long and then find ourselves in a situation where the labor market becomes unsustainably tight, price pressures become excessive, and we have to move rates up steeply, we could risk a recession, a bad outcome that history tells us disproportionately harms the more vulnerable parts of our society. I think we also have to recognize that if we fail to exit gracefully from the nontraditional policy actions we took in the aftermath of the crisis — actions I thought were necessary and effective — we could jeopardize their use in the future, should the need arise again.

    For these reasons, I favor taking the next step on the gradual path of rising interest rates. The lesson that policy should be forward looking is based on the history of poor outcomes when that strategy hasn’t been followed. In the face of evidence that the economy is on track to meet our goals over the medium run, sometimes being prudent means moving the policy rate up.

  • Janet L. Yellen The majority [of FOMC members say] that they would see it as appropriate to make a move to [tighten] this year if things continue on the current path and no significant new risks arise.

    [ September 28, 2016 ]

    While there's no fixed time table for removing {the Fed's accomodative policy], many of my colleagues indicated in their recent projections, the majority that they would see it as appropriate to make a move to take a step in that direction this year if things continue on the current path and no significant new risks arise.

  • Stanley Fischer I don’t like [ultra-low rates]it, but I don’t want to raise the interest rate too much. I think we should at some point. I don’t know when.

    [ September 27, 2016 ]

    “It bothers me, it really bothers me,” he said when asked about low rates at an event for economics students at Howard University in Washington.

    “I think there’s also a problem in going to a zero interest rate in the sense that it says that capital isn’t very productive, there’s not much going on in the economy,” Mr. Fischer said, adding that “we would be better off if there was a price for using money.”

    “I don’t like it, but I don’t want to raise the interest rate too much. I think we should at some point. I don’t know when,” he said. “The interest rate I believe is not at zero at a normal level and it should be [normal] at some point, not immediately.”

  • Robert S. Kaplan I would have been comfortable in seeing some removal of accommodation in September... [While there aren’t signs the U.S. economy is overheating], I am concerned about distortions rates this low are creating.

    [ September 26, 2016 ]

    “I would have been comfortable in seeing some removal of accommodation in September,” Kaplan told the Independent Bankers Association of Texas meeting in San Antonio on Monday. While there aren’t signs the U.S. economy is overheating, “I am concerned about distortions rates this low are creating,” he said.

  • Daniel K. Tarullo One of the most important lessons of the financial crisis was that prudential regulation, including capital regulation, had been dominantly microprudential in nature, even for the largest firms. That is, the regulation was designed and applied with a view mostly to the idiosyncratic risks faced by a bank in isolation, without regard to the interaction of the bank and the financial system as a whole.

    [ September 26, 2016 ]

    One of the most important lessons of the financial crisis was that prudential regulation, including capital regulation, had been dominantly microprudential in nature, even for the largest firms. That is, the regulation was designed and applied with a view mostly to the idiosyncratic risks faced by a bank in isolation, without regard to the interaction of the bank and the financial system as a whole. Thus, for example, capital regulation did not take account of fire sale effects--the reduction in portfolio values for one bank by other banks selling certain types of assets in order to enhance their own solvency or to counter a reduction in funding availability. Similarly, microprudential capital regulation allows a bank to meet its capital ratios by reducing lending--that is, by reducing the denominator of its ratio--as well as by increasing capital. If many banks were to follow this strategy, even creditworthy borrowers would be adversely affected, thereby exacerbating an economic downturn.

  • Jeffrey Lacker I think we got more credit when the economy was going really well in the ‘90s than we deserved.

    [ September 25, 2016 ]

    I think we got more credit when the economy was going really well in the ‘90s than we deserved. Our job is to keep inflation low and stable, we did a good job of that in the 90s, but the tech boom wasn’t our responsibility, we didn’t bring that about.

    Similarly, I think we get more blame for a sluggish recovery than we deserve. There really isn’t anything monetary policy can do about the rate of productivity growth, the rate of capital formation that goes into that... I think we’ve done a good job since the recession ended and people need to realize that there’s a range of policy out there. We’re responsible for a narrow slice of economic policy, just what affects the inflation rate.

  • Neel Kashkari dark trader
    @neelkashkari do u see a bubble/over heated housing market? #askneel Neel Kashkari
    We monitor such markets closely. Don’t see a housing bubble. Admittedly these are hard to spot in advance, so we must be humble & vigilent [sic]

    [ September 23, 2016 ]

    dark trader
    @neelkashkari do u see a bubble/over heated housing market? #askneel

    Neel Kashkari
    We monitor such markets closely. Don’t see a housing bubble. Admittedly these are hard to spot in advance, so we must be humble & vigilent [sic]

  • Robert S. Kaplan We can afford to be patient in removing accommodation. We are not as accommodative, probably, as people would think.

    [ September 23, 2016 ]

    “We don’t think the economy is overheating,” Robert Kaplan, president of the Dallas Fed, said in Houston. “We can afford to be patient in removing accommodation. We are not as accommodative, probably, as people would think.”

  • Eric Rosengren Accomplishing a soft landing is difficult, and very rarely achieved...  I am arguing for modest, gradual tightening now, out of concern that not doing so today will put the recovery’s duration and sustainability at greater risk, by generating the sorts of significant imbalances that historically have led to a recession.

    [ September 23, 2016 ]

    Unemployment this low may well have the desirable effect of bringing more workers into the labor force – but, unfortunately, only temporarily. Historical experience suggests it also risks overheating the economy, the effects of which include heightened pressure on inflation and potentially increasing financial-market imbalances. Gently backing the economy away from such imbalances has proven to be very difficult in the past. In fact, such overshoots have in the past always resulted in a recession, rather than a return to the full employment level. Accomplishing a soft landing is difficult, and very rarely achieved. This is true whether reducing the unemployment rate, such as from its recent high of 10 percent, or raising it back to its full employment value from below.

    My goal is to achieve a long and durable recovery – a sustainable expansion. For the reasons articulated above, I believe a significant overshoot of the full employment level could shorten, rather than lengthen, the duration of this recovery…

    As a result I am arguing for modest, gradual tightening now, out of concern that not doing so today will put the recovery’s duration and sustainability at greater risk, by generating the sorts of significant imbalances that historically have led to a recession.

  • Janet L. Yellen The decision not to raise rates today and to wait for some further evidence... is largely based on the judgment that we're not seeing evidence that the economy is overheating... and that we are seeing evidence that people are being drawn in in larger numbers ... into the labor market, and that's healthy to continue.

    [ September 21, 2016 ]

    The decision not to raise rates today and to wait for some further evidence that we're continuing on this course is largely based on the judgment that we're not seeing evidence that the economy is overheating and that we are seeing evidence that people are being drawn in in larger numbers than at least I would have expected into the labor market and that that's healthy to continue.

  • Lael Brainard This asymmetry in risk management in today's new normal counsels prudence in the removal of policy accommodation.

    [ September 12, 2016 ]

    In the case of unexpected strength, we have well-tried and tested tools and ample policy space in which to react... In the face of an adverse shock, however, our conventional policy toolkit is more limited, and thus the risk of being unable to adequately respond to unexpected weakness is greater. The experience of the Japanese and euro-area economies suggest that prolonged weakness in demand is very difficult to correct, leading to economic costs that can be considerable.

    This asymmetry in risk management in today's new normal counsels prudence in the removal of policy accommodation. I believe this approach has served us well in recent months, helping to support continued gains in employment and progress on inflation. I look forward to assessing the evolution of the data in the months ahead for signs of further progress toward our goals, bearing in mind these considerations.

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/speech/brainard20160912a.htm

    Venue:

    Chicago Council on Global Affairs
  • Neel Kashkari There doesn’t appear to be a huge urgency to do anything.

    [ September 12, 2016 ]

    “There doesn’t appear to be a huge urgency to do anything,” Kashkari said in an interview on CNBC.

    The Minneapolis Fed president, who is not a voting member of the Fed’s policy committee, this year, said he wanted to see “more movement” in core inflation, which he said was “stuck” at a 1.6% annual rate.

  • Dennis Lockhart I think circumstances call for a lively discussion next week.

    [ September 12, 2016 ]

    Financial markets seem to be very sensitive to remarks of Fed speakers at the moment. I'd like to avoid any chance of contributing to market volatility in advance of the September 20 and 21 meeting, so this morning I don't plan to offer an opinion on what will likely be done at the September, November, or December meetings.

    ...

    In interviews at the Jackson Hole meeting in late August, I took the position that if the incoming data leading up to next week's meeting remained consistent overall with my sense of the economy, I would encourage "serious discussion" of a policy rate increase.

    Notwithstanding a few recent weak monthly reports—from the Institute for Supply Management, for example—I am satisfied at this point that conditions warrant that serious discussion.

    ...

    The 12-month trend in payroll jobs growth has slowed a bit from its peak in the beginning of 2015, and I think it's reasonable to expect some further slowing in jobs growth as the economy approaches full employment. Importantly, I consider the most recent number—151,000—to be comfortably above the various estimates of "break even," the number needed to hold the unemployment rates constant...

    That said, we are not yet seeing inflation data confirming that we're near full employment. I find the continuing shortfall from the Committee's inflation target and the ambiguous evidence of movement toward target to be a frustrating element in the picture...

    I am a big believer in a dashboard approach to assessing the run rate of inflation. So, working with my team at the Atlanta Fed, I look at a wide range of price measures. For policy purposes, we are always trying to discern the fundamental underlying behavior of prices separate from transitory influences. Recently we have been closely monitoring the Dallas Fed's trimmed-mean inflation index as a reasonable proxy for the underlying inflation trend.

    This measure of inflation has been very constant for four years now. It's been consistently around 1.6 percent and has varied from that reading by only two-tenths or less. By this measure, progress toward the Committee's inflation objective appears to have stalled.

  • Daniel K. Tarullo I don't exclude the possibility that in some circumstances, the federal funds rate increase could be an appropriate response to financial stability concerns. I think those would be pretty unusual circumstances and I don't think we're in them right now.

    [ September 9, 2016 ]

    CNBC: One more question. Your colleague on the FOMC, Eric Rosengren, he's a voter this year, president of Boston, is very concerned about financial stability when it comes to these low rates. Is that something that animates your thinking about rates that we've had rates so low for so long that we've created excesses in the financial system?

    TARULLO: There's no question, but that when rates are low for a long time, that there are opportunities for frothiness and, perhaps, overleverage in particular asset markets. And I do think we need to be aware of that. But being aware of it is different from saying, therefore, the answer is to raise rates. Now, I, again, myself, don't exclude the possibility that in some circumstances, the federal funds rate increase could be an appropriate response to financial stability concerns. I think those would be pretty unusual circumstances and I don't think we're in them right now.