wricaplogo

Keyword Search

RETURN

Categories

Recent FedSpeak Highlights

  • Esther L. George 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 ]

    BLOOMBERG: 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.

  • Robert S. Kaplan I would actually say every Fed meeting is a live meeting.

    [ August 24, 2016 ]

    I 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.

  • Stanley Fischer We are close to our targets.

    [ August 21, 2016 ]

    Employment 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.

  • John Williams 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.

    [ August 18, 2016 ]

    I 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.

  • John Williams 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.

    [ August 18, 2016 ]

    In 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.

  • James Bullard "The policy rate will likely remain essentially flat over the forecast horizon to remain consistent with the current regime.”

    [ August 17, 2016 ]

    In 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.”

  • Dennis Lockhart At 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.

    [ August 16, 2016 ]

    At 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.

  • Dennis Lockhart My baseline forecast calls for achievement of the Fed's core monetary policy objectives over the next year and a half.

    [ August 16, 2016 ]

    My baseline forecast calls for achievement of the Fed's core monetary policy objectives over the next year and a half.

  • James Bullard 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.

    [ August 12, 2016 ]

    SIEGEL: 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.

  • John Williams 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.

    [ August 11, 2016 ]

    WP: 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.

  • 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.”

    [ August 3, 2016 ]

    “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.”

  • Dennis Lockhart We’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 ]

    We’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.

  • Robert S. Kaplan 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.

    [ August 2, 2016 ]

    I 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.

  • Robert S. Kaplan 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 ]

    I 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.

  • 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,"

    [ August 1, 2016 ]

    "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."

  • William C. Dudley There 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.

    [ July 31, 2016 ]

    There 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.

  • William C. Dudley I think it is premature to rule out further monetary policy tightening this year.

    [ July 31, 2016 ]

    I think it is premature to rule out further monetary policy tightening this year. As I said before, it depends on the data, broadly defined, and, as we all know, that is not something one can predict with any accuracy.

  • John Williams “There’s definitely a data stream that could come through in the next couple of months that I think would be supportive of two rate increases.”

    [ July 29, 2016 ]

    “There’s definitely a data stream that could come through in the next couple of months that I think would be supportive of two rate increases,” Williams told reporters Friday after speaking in Cambridge, Massachusetts. “There’s data that we could get that wouldn’t be supportive of that -- it could be one, maybe, or none. Time will tell.”
    ...
    “It makes sense to continue on the process of the gradual removal of accommodation -- my personal view is it makes sense, assuming the data will support that, to raise rates again this year, but it is data-dependent,” Williams said. “We’ll get a couple more employment reports, more data on inflation before our next meeting.”

  • Narayana Kocherlakota Then Yellen can use her Jackson Hole speech to explain what those factors are, and how they will guide policy over the next six months. That would be a lot more useful than providing yet another forecast path of interest rates -- one that that is almost sure to be wrong.

    [ July 25, 2016 ]

    Back in December 2015, when the Fed increased rates for the first time in seven years, it seemed to have a framework in place: Although it did say that the exact pace of further increases would depend on the incoming economic data, it clearly indicated that it intended to raise rates by a quarter percentage point about every three months for the next three years. Now, that guidance seems obsolete: As of Wednesday, the Fed will have raised rates exactly zero times since December.

    So what's the framework now?
    ...
    My forecast is that the Fed will remain reluctant to raise rates until inflationary pressures are much stronger, at which point it will feel compelled to move at a faster pace than four times per year. This is similar to Chicago Fed President Charles Evans’s suggestion that the central bank should wait to raise rates until core inflation reaches 2 percent. If prices start rising at that rate, the Fed will be right to put a lot more weight on inflationary concerns than on downside risks.

    That said, I don’t have any inside knowledge of what the Fed's policy makers are thinking. They'll have to engage in some collective soul-searching over the next couple days, and figure out what one or two factors have been most critical in shaping their decisions so far this year. Then Yellen can use her Jackson Hole speech to explain what those factors are, and how they will guide policy over the next six months. That would be a lot more useful than providing yet another forecast path of interest rates -- one that that is almost sure to be wrong.

  • James Bullard Generally speaking, however, size restrictions seem arbitrary. Why should a particular bank size be risky and another size not be risky?

    [ July 18, 2016 ]

    I have been an advocate of a system with smaller financial institutions which can be allowed to fail, if necessary. Generally speaking, however, size restrictions seem arbitrary. Why should a particular bank size be risky and another size not be risky? In addition, recent evidence suggests that substantial economies of scale exist, perhaps even for the largest financial institutions. Furthermore, the primary concern could be that complexity or interconnectedness is the trigger toward financial fragility rather than size itself.