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  • Esther L. GeorgeAB: Do you think there is still time to normalize interest rates before another crisis strikes, or have low rates distorted the market too much?

    GEORGE: We don't know — we can't know that. And that's why you have to use your best gauges. And one of the gauges is, you have to have a forecast. If you know decisions you make today operate with a lag, you have to have some understanding based on how much I trust the data I've seen to make a forecast of where I think the economy is going. You have to be willing to adjust if it doesn't turn out that way. But to gauge if you're too soon or too late — by the time you know that, you have waited too long. We don't want to find ourselves there. So I can't know if we have plenty of time. What I can see is, the two metrics we often use — employment and inflation — I make a forecast based off of those, and those suggest to me that now is a good time. And I thought 'now' was good going back earlier this year, to say things are moving in a way that a small, gradual move would be consistent [with the Fed's objectives].

    [ August 29, 2016 ]
  • Janet L. YellenIndeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook

    [ August 26, 2016 ]
  • Loretta J. MesterCNBC: So what do you have dialed in for the full year [for GDP]? We talked to somebody yesterday that had a 2% forecast for the full year, [which means] that they’d have to do 3% on the back-end.

    MESTER: You know, I think that’s reasonable. It’s going to be hard to get to 2%, given [the necessity of a 2nd half] 3%, but I don’t think that’s an unreasonable forecast.

    CNBC: You think we could do 3% [GDP] in the 2nd half of the year?

    MESTER: Yeah, we could do that.

    [ August 26, 2016 ]
  • James BullardOur forecast does call for a rate rise, but I’m agnostic on exactly when we do that... I do like to move on good news on the economy, so if we got to a meeting and we felt things were looking stronger, that might be a good time to do that.
    ...
    The important point is not that there is a rate hike. The important point about our framework is there’s a rate hike, but there’s not this on-the-cusp-of-200-basis-points story, which is the story that we’re telling in our dot plot. And that’s what I’m trying to break down. We don’t have anywhere near that kind of certainty about where the long-run outcome is for the U.S.

    [ August 26, 2016 ]
  • Esther L. GeorgeBLOOMBERG: I think most of our audience has heard the term R*. It’s become quite the trendy term these days – the rate that neither stimulates nor retards the economy has come way down – how much stock do you put in that argument, and how much, if so, have you moved down, because you said that you’ve pretty much kept your [forecast for the neutral rate] in place?

    GEORGE: I think it’s possible that R* is lower today, but again, we don’t know. And I think even if you assume that there is a lower terminal rate, we would be stimulative even under that condition. So, I think regardless, even if you think R* is lower, it might warrant that we should begin moving a little more systematically than we have been.

    [ August 25, 2016 ]
  • Robert S. KaplanI would actually say every Fed meeting is a live meeting, so seriously. I know some people, you know, comment to varying degrees, but, yeah, so every meeting is a live meeting.

    [ August 24, 2016 ]
  • Stanley FischerEmployment has increased impressively over the past six years since its low point in early 2010, and the unemployment rate has hovered near 5 percent since August of last year, close to most estimates of the full-employment rate of unemployment. The economy has done less well in reaching the 2 percent inflation rate. Although total PCE inflation was less than 1 percent over the 12 months ending in June, core PCE inflation, at 1.6 percent, is within hailing distance of 2 percent--and the core consumer price index inflation rate is currently above 2 percent.

    So we are close to our targets. Not only that, the behavior of employment has been remarkably resilient. During the past two years we have been concerned at various stages by the possible negative effects on the U.S. economy of the Greek debt crisis, by the 20 percent appreciation of the trade-weighted dollar, by the Chinese growth slowdown and accompanying exchange rate uncertainties, by the financial market turbulence during the first six weeks of this year, by the dismaying pothole in job growth this May, and by Brexit--among other shocks.

    [ August 21, 2016 ]
  • John WilliamsI should know better by now, but even if I change the channels for an hour or two, I’m constantly surprised by the commentary that seems to miss the larger playing field. In a robust labor market, we simply don’t need to create as many jobs as we did when we were trying to climb out of the hole dug for us by the recession. Over the past few years, we’ve seen outstanding numbers—in 2014 and 2015 the economy added nearly 3 million jobs a year, and 2016 is on track to deliver about another 2¼ million jobs.

    That’s great news, but the fact is we won’t need as much job growth going forward. We’re pretty much at full employment now, so the future is less about meeting a goal and more about maintaining a result. That means creating enough new jobs to keep up with the increase in the size of the labor force.

    [ August 18, 2016 ]
  • John WilliamsIn the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later. I have a few reasons for saying that.

    First, Milton Friedman famously taught us that monetary policy has long and variable lags. Research shows it takes at least a year or two for it to have its full effect... If we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark. And that creates its own risks of a hard landing or even a recession.

    Second, experience shows that an economy that runs too hot for too long can generate imbalances, ultimately leading to either excessive inflation or an economic correction and recession. In the 1960s and 1970s, it was runaway inflation. In the late 1990s, the expansion became increasingly fueled by euphoria over the “new economy,” the dot-com bubble, and massive overinvestment in tech-related industries. And in the first half of the 2000s, irrational exuberance over housing sent prices spiraling far beyond fundamentals and led to massive overbuilding. If we wait too long to remove monetary accommodation, we hazard allowing these imbalances to grow, at great cost to our economy.

    [ August 18, 2016 ]
  • James BullardIn the new [regime-based] narrative, the concept of a single, long-run steady state is abandoned. Instead, there is a set of possible ‘regimes’ that the economy may visit.” He added that regimes are generally viewed as persistent and that switches between regimes, while possible, are not forecastable. He said that the current regime appears to be characterized by slow growth, low real rates of return on safe assets and no recession.

    In terms of monetary policy, which is regime-dependent, the implication is that “the policy rate will likely remain essentially flat over the forecast horizon to remain consistent with the current regime.”
    ...
    “If there are no major shocks to the economy, this situation could be sustained over a forecasting horizon of two and a half years,” he said. “These facts suggest that it may be time to quit using the old narrative.”

    [ August 17, 2016 ]
  • Dennis LockhartAt these low [growth] numbers, an apparent decelerating pace of growth would not seem compatible with policymakers' thinking about raising interest rates. Yet I, as one Fed policymaker, am not prepared to rule out at least one rate hike before year's end.

    When the history of the post-recession economic expansion is written, it will be described as a long period of relatively slow growth. Through mid-2015, GDP growth averaged a little over 2 percent. Over the last year, GDP growth has averaged just 1.2 percent. Over the first half of 2016, GDP growth has averaged just 1.0 percent at an annual rate. At face value, it might appear that economic momentum is decelerating.

    At these low numbers, an apparent decelerating pace of growth would not seem compatible with policymakers' thinking about raising interest rates. Yet I, as one Fed policymaker, am not prepared to rule out at least one rate hike before year's end.
    ...
    In my official forecasts submitted quarterly as part of the FOMC process, and in my public comments, I have marked down my expectations of what is sufficient growth. I've come to the view that GDP growth at around 2 percent in today's economy is sufficient to achieve the Fed's monetary policy objectives of full employment and price stability in a reasonable timeframe.

    [ August 16, 2016 ]
  • Dennis LockhartMy baseline forecast calls for achievement of the Fed's core monetary policy objectives over the next year and a half.

    [ August 16, 2016 ]
  • James BullardSIEGEL: So you’d have to go a little higher [toward the 2% target before] you thought that inflation were a problem?

    BULLARD: Right. So I guess I wouldn’t want to make [the entire policy outlook] contingent on whether inflation’s at 1.9 percent or 2 percent or 2.1 percent. I think that’s kind of a false precision about inflation. We don’t measure it that well. And so what we’re saying is that, you know, in the world of macroeconomics, if you’re at 1.7, 1.8, 1.9, that’s pretty close to 2. And you should think of this as a regime that’s likely to be persistent over the next couple of years. We do think inflation will creep up a little bit here, but it’s certainly not been increasing at a rapid rate over the last several years.

    [ August 12, 2016 ]
  • John WilliamsWP: How does [your economic outlook] translate into the appropriate path for monetary policy?

    WILLIAMS: Based on where we are relative to goals, we still need to be accommodative. I still want to see the good, strong labor market continue. I still want to see inflation moving back up to 2 percent. I do want to see monetary policy still having the foot on the gas, not on the brakes.

    But we need to continue to execute on the basic strategy that we’ve laid out over the past couple of years, and that’s a gradual path of removing accommodation, taking our foot very gradually off the gas. We’re not getting anywhere close to the brakes here, and I think we can do that in an orderly, systematic way based on the flow of data.

    WP: So, just cutting to the chase here, does that gradual path of rate increases include any this year, in your view?

    WILLIAMS: In my view, it does. We’ve been adding enormous policy accommodation over the past several years. As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years.
    ...
    We want to continue with a gradual path of increases. I don’t think that would interfere in any way with our growth continuing. That would not in any way stall the economy. I just think that would be consistent with the positive developments we’ve seen.

    In terms of my own view of whether a rate hike makes sense at the upcoming meetings, it would really be based on how are we doing on our dual mandate goals. I don’t necessarily need to see signs that the labor market is continuing to roar ahead and unemployment continuing to plummet. I just need to see a labor market that is at, or even better than, a normal measure of full employment. On the inflation data, I’m just looking for confirmation that the data are continuing to show the inflationary trends are consistent with the outlook that I’ve written down.

    I’m definitely not one of those who thinks we should wait until we see inflation get to 2 percent before we raise rates. I think that would put us significantly behind the curve. People say, "What are you worried about? Why not raise rates then?" I think then we would have to raise rates relatively quickly, and I think that abrupt shift in policy could be disruptive.

    [ August 11, 2016 ]
  • Charles L. Evans“We ought to get to a point where the probability that inflation is above 2 percent is somewhat higher than the probability that we are going to continue to under-run it,” the Chicago Fed chief said. “One way to do that is if we sort of go through 2 percent a bit -- I would say we can do that in a controlled fashion.”

    [ August 3, 2016 ]
  • Dennis LockhartWe’ve said many times as members of the FOMC- and I remember Chairman Bernanke making this point several times- it would be best if monetary policy had a fiscal partner. It would be best if everyone were rolling in the same direction.

    [ August 2, 2016 ]
  • Robert S. KaplanI am closely monitoring how slowing growth, high levels of overcapacity and high levels of debt to GDP in major economies outside the U.S. might be impacting economic conditions in the U.S. I am also closely tracking how these issues might be affecting the slope of the U.S. Treasury yield curve as well as measures of tightness in financial conditions.

    In light of these challenges, I have been suggesting that removal of accommodation should be done in a gradual and patient manner, based on a realistic assessment of progress toward achieving the Federal Reserve’s dual-mandate objectives regarding full employment and price stability. I am also very cognizant that, from a risk-management point of view, our monetary policies have an asymmetrical impact at or near the zero lower bound.

    [ August 2, 2016 ]
  • Robert S. KaplanI am strongly persuaded by arguments that aging demographics in advanced economies, slower productivity growth and the continued emergence of the U.S. as a source of safe assets have all contributed to the decline in the neutral rate. I also believe that high levels of debt to GDP in advanced economies and higher levels of political polarization have, at a minimum, limited the capacity of these countries to implement fiscal policy and structural reforms that could have stimulated higher rates of growth. This situation has, in turn, caused the neutral rate to be lower than it would be otherwise.
    ...
    In light of the decline in the neutral rate, using monetary policy to help manage the economy has become more challenging.

    Monetary policy has a key role to play in economic policy. However, at or near the zero lower bound, it may be less effective than other tools of economic policy. Monetary policy is not designed, by itself, to address the key structural issues we face today stemming from demographic changes, lower rates of productivity growth and high levels of debt to GDP as well as dislocations created by globalization and increasing rates of economic disruption.

    For the past eight years, advanced economies have relied heavily on monetary policy and much less on fiscal policy or structural reforms. However, at this stage, if we are going to generate higher sustainable rates of GDP growth and address key secular issues, there needs to be policy action beyond monetary policy.

    [ August 2, 2016 ]
  • Robert S. Kaplan"September is very much on the table but I think we’ll have to see how events unfold and so it’s too soon to jump to a conclusion," Kaplan said. "We still believe the consumer will be strong in 2016, but it makes us also be very watchful for the next number of data releases to see what trend we’re on."

    [ August 1, 2016 ]
  • William C. DudleyThere is a lot as well that is outside the Fed’s purview [following the 2007 financial crisis] that could have been done to make the U.S. economy perform better. This includes tax reform, job retraining programs and infrastructure investment.

    Could things have been done differently in the U.S. in such a way that would have led to better outcomes? Absolutely. With the benefit of hindsight, we could have and should have been even more aggressive on the monetary policy side. While we made progress with some of the innovations on monetary policy that we eventually introduced—such as the open-ended purchase of $85 billion of Treasury and MBS securities per month—it would have been better if we had done this sooner.

    There is a lot as well that is outside the Fed’s purview that could have been done to make the U.S. economy perform better. This includes tax reform, job retraining programs and infrastructure investment.

    So, what can we do to bolster global growth in the future? The first is to undertake the necessary structural reforms to make our economies more efficient. Productivity growth is not preordained. The steps we take as countries to eliminate and lessen bottlenecks and improve our human and physical capital are important. The second is to ensure that our financial systems are well-functioning. Tremendous progress has been made globally in implementing higher capital and liquidity standards post-crisis. But we still see some important banking systems impaired by bad loans, low profitability and inadequate capital.

    [ July 31, 2016 ]