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Recent FedSpeak Highlights

  • Charles L. Evans “At 4.6 percent unemployment and an expectation that the economy will continue to be strong, you don’t need explicit stimulus.”

    [ December 5, 2016 ]

    “At 4.6 percent unemployment and an expectation that the economy will continue to be strong, you don’t need explicit stimulus” from the government, according to Evans.

  • William C. Dudley I favor automatic, rather than discretionary, fiscal actions because they would typically go into effect more quickly and would be better anticipated.

    [ December 5, 2016 ]

    I favor automatic, rather than discretionary, fiscal actions because they would typically go into effect more quickly and would be better anticipated. Expectations matter greatly in affecting economic behavior. For example, if the economy were to weaken, the anticipation that strong fiscal stabilizers would kick in to support incomes should lead workers to be less fearful about losing their jobs, and businesses to be less concerned that demand for their products might fall precipitously. This, in turn, would make workers more confident that they could sustain their spending, and would make businesses more confident that they could keep workers on their payrolls.

    What type of fiscal stabilizers would be most effective? I would turn first to those that Congress has implemented on a discretionary basis during past economic downturns, such as extensions of unemployment compensation and cuts in payroll taxes. For example, when the unemployment rate climbs, extensions of the duration of eligibility for unemployment compensation could be triggered automatically, helping to stabilize household income. Similarly, when the unemployment rate breaches certain thresholds, payroll tax cuts could be triggered, helping to support the disposable income of workers facing reductions in hours. Payroll tax cuts also have the advantage of skewing more toward low- and moderate-income workers, who typically have a higher propensity to consume out of current income.

    Obviously, it is up to the incoming Administration and Congress to decide on the appropriate fiscal measures. But, the point that I want to highlight is that robust automatic fiscal stabilizers would complement monetary policy, and take some pressure off of the Federal Reserve to undertake extraordinary measures in situations where there is little scope for cutting short-term interest rates.

  • Daniel K. Tarullo As I have suggested, there is surely a healthy debate to be had as to whether additional strengthening of resiliency measures is appropriate for the largest institutions. But I do not think there is a sound economic case for generally weakening the regulatory requirements applicable to the largest banks. And I certainly do not think the taxpayers should bear the risk that would be entailed by any such weakening.

    [ December 2, 2016 ]

    There are surely refinements that can be made to the regulatory regime that has emerged, particularly--though not exclusively--with respect to smaller banks that pose neither systemic nor macroprudential risks. And, as I have suggested, there is surely a healthy debate to be had as to whether additional strengthening of resiliency measures is appropriate for the largest institutions. But I do not think there is a sound economic case for generally weakening the regulatory requirements applicable to the largest banks. And I certainly do not think the taxpayers should bear the risk that would be entailed by any such weakening.

  • Robert S. Kaplan We are – we are trillions underinvested. We are underinvested in U.S. infrastructure.

    [ December 1, 2016 ]

    We are – we are trillions underinvested. We are underinvested in U.S. infrastructure. China, you might argue, is overinvested. We’re underinvested, and there’s varying studies about the amount of underinvestment in the United States. But it certainly, you know, could easily be in excess of a couple of trillion dollars, and I’ve seen estimates higher – as high as 3 trillion. And I think improving our infrastructure, if it’s done intelligently where there’s a need, should help bolster growth. Yes, it does in the near term create jobs, but it also may help improve productivity over the longer term. That’s an important structural thing.
    ...
    And so we need to look at these. And so those are the ones that are high up on my list of things that, you know, would be helpful. Anything that improves growth in the workforce and productivity of the workforce, and in addition incentives that help encourage capital spending – which has been very sluggish – those are all things that help push back against these big secular headwinds of aging demographics, globalization, end of the debt supercycle, and technology-enabled disruption.

    And so monetary policy can’t really do that. We’ve done our part, but you need other, broader economic policies.

  • Loretta J. Mester I view a small step up in interest rates as appropriate, not because I want to curtail the expansion, but because I believe it will help prolong the expansion. We know that monetary policy affects the economy with long and variable lags, so policy actions have to be taken before our policy goals are fully met. The lesson that policy should be forward looking is based on the history of poor outcomes when that strategy hasn’t been followed and we’ve fallen far behind the curve.

    [ November 30, 2016 ]

    When the Committee met in early November, it assessed that the case for moving the policy rate up had continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward the dual-mandate objectives. I, and one of my colleagues, dissented from that decision, preferring to see a 25-basis-point rise.

    I view a small step up in interest rates as appropriate, not because I want to curtail the expansion, but because I believe it will help prolong the expansion. We know that monetary policy affects the economy with long and variable lags, so policy actions have to be taken before our policy goals are fully met. The lesson that policy should be forward looking is based on the history of poor outcomes when that strategy hasn’t been followed and we’ve fallen far behind the curve. 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 disproportionately harms the more vulnerable parts of our society. Delaying for too long might also induce investors to search for yield, raising risks to financial stability. I do not think we are behind the curve yet, but I think the risks to macroeconomic stability and to financial stability will grow over time should we fail to take appropriate action given where we are on our goals and the current low level of our policy rate. I view another increase in interest rates as a prudent step to take.

    I anticipate that a gradual upward path of policy is likely to be appropriate given economic developments. That means that the policy rate won’t be moving up at each meeting and that policy will remain accommodative for some time, continuing to lend support to the economic expansion going forward. It will allow us to recalibrate policy over time as we gain more insight into the underlying structural aspects of the post-crisis economy and as the economy evolves.

  • Stanley Fischer For several years, the Fed has been close to being "the only game in town," as Mohamed El-Erian described it in his recent book. But macroeconomic policy does not have to be confined to monetary policy. Certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy and help confront some of our longer-term economic challenges.

    [ November 21, 2016 ]

    For several years, the Fed has been close to being "the only game in town," as Mohamed El-Erian described it in his recent book. But macroeconomic policy does not have to be confined to monetary policy. Certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy and help confront some of our longer-term economic challenges. While there is disagreement about what the most effective policies would be, some combination of improved public infrastructure, better education, more encouragement for private investment, and more effective regulation all likely have a role to play in promoting faster growth of productivity and living standards. By raising equilibrium interest rates, such policies may also reduce the probability that the economy, and the Federal Reserve, will have to contend more than is necessary with the effective lower bound on interest rates.

  • Esther L. George As a voting member of the Committee, I dissented in favor of a modest 25-basis point increase. My view is that monetary policy should avoid deliberately stoking the risks that come with overheating the U.S. economy and instead, slowly raise the federal funds rate to promote maximum employment commensurate with the economy’s long-run potential to increase production.

    [ November 18, 2016 ]

    As a voting member of the Committee, I dissented in favor of a modest 25-basis point increase. My view is that monetary policy should avoid deliberately stoking the risks that come with overheating the U.S. economy and instead, slowly raise the federal funds rate to promote maximum employment commensurate with the economy’s long-run potential to increase production.

    Supporting conditions that bring more people into the workforce is certainly a desirable objective. However, over the last 55 years, there have been occasions where the unemployment rate has fallen below a level that is consistent with the maximum sustainable level of employment. In these cases, the U.S. economy soon after faced a period of substantial and prolonged increases in unemployment. The effect of allowing the economy to overheat in these cases produced short-term gains, but ultimately with longer-term costs. Consequently, I see moving sooner, rather than later, as taking into account the long and variable lags with which monetary policy operates, and reduces the potential for “go-stop” types of policies that create volatility, rather than subdue it.

  • James Bullard “It is better to see the Fed as approximately on hold, with just very small moves upward,” he told reporters. “One change a year, with the [Fed’s] balance sheet still big, is really not much of a change in U.S. monetary policy.”

    [ November 18, 2016 ]

    “Markets are currently [pricing in a] high probability of a December move, I’m leaning toward supporting that,” Mr. Bullard said at a banking conference [in Frankfurt]. “The question now is about 2017.”
    ...
    “It is better to see the Fed as approximately on hold, with just very small moves upward,” he told reporters.

    “One change a year, with the [Fed’s] balance sheet still big, is really not much of a change in U.S. monetary policy,” he said.

  • Janet L. Yellen The longer-run deficit problem needs to be kept in mind. In addition, with the debt-to-GDP ratio at around 77 percent, there's not a lot of fiscal space, should a shock to the economy occur, an adverse shock, that did require fiscal stimulus.

    [ November 17, 2016 ]

    It's clearly up to Congress and the administration to weigh the costs and benefits of fiscal policies that you will be considering. My advice would be that several principles should be taken into account as you make these judgments.

    First of all, the economy is operating relatively close to full employment at this point. So in contrast to where the economy was after the financial crisis, when a large demand boost was needed to lower unemployment, we're no longer in that state.

    You mentioned the longer-term fiscal outlook; the CBO's assessment, as you know, is that there are longer-term fiscal challenges that the debt-to-GDP ratio at this point looks likely to rise as the age -- as the Baby Boomers retire and population aging occurs.

    And that longer-run deficit problem needs to be kept in mind. In addition, with the debt-to-GDP ratio at around 77 percent, there's not a lot of fiscal space, should a shock to the economy occur, an adverse shock, that did require fiscal stimulus.

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/testimony/yellen20161117a.htm

    Venue:

    Testimony to the Joint Economic Committee
  • Janet L. Yellen I was confirmed by the Senate to a four- year term, which ends at the end of January of 2018, and it is fully my intention to serve out that term.

    [ November 17, 2016 ]

    I was confirmed by the Senate to a four- year term, which ends at the end of January of 2018, and it is fully my intention to serve out that term.

    More From:

    See Also:

    Source:

    http://www.federalreserve.gov/newsevents/testimony/yellen20161117a.htm

    Venue:

    Testimony to the Joint Economic Committee
  • Loretta J. Mester "My path may be a little bit above the consensus path."

    [ November 16, 2016 ]

    "My path may be a little bit above the consensus path," Mester said of expected rate hikes. "The economy is getting back to both parts of our goals (so) it just seems appropriate to start moving rates up," she said, referring to the Fed's inflation and employment targets.

  • Neel Kashkari In Step 2 of the Minneapolis Plan, we reduce the risk of a future crisis and bailout to as low as 9 percent. Again, the added safety isn’t free. The total cost is as high as 41 percent of GDP, which is much higher than current regulations, but still much smaller than the cost of a financial crisis.

    [ November 16, 2016 ]

    Finally, in Step 2 of the Minneapolis Plan, we reduce the risk of a future crisis and bailout to as low as 9 percent. Again, the added safety isn’t free. The total cost is as high as 41 percent of GDP, which is much higher than current regulations, but still much smaller than the cost of a financial crisis.

  • James Bullard “A single policy rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting.”

    [ November 16, 2016 ]

    In terms of the macroeconomic outlook, “the near-term St. Louis Fed forecast remains unchanged as of today,” Bullard said, adding, “our outlook for monetary policy is also unchanged.” He noted that U.S. unemployment is effectively at the FOMC’s estimate of its long-run level, while U.S. inflation is low but close to the FOMC’s 2 percent target and rising. In addition, safe real rates of return are low and are not expected to change.

    “A single policy rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting,” Bullard said.

  • Daniel K. Tarullo The discussion of when is the appropriate moment for raising rates in order to prevent the economy from overheating too much is now, from my point of view, more on the table than it may have been before.

    [ November 15, 2016 ]

    “The discussion of when is the appropriate moment for raising rates in order to prevent the economy from overheating too much is now, from my point of view, more on the table than it may have been before,” Tarullo said Tuesday at an economic and political forum in Washington, adding, “I still think there are grounds for caution.”

    ...

    Tarullo pointed to upward ticks in inflation and core inflation, the latter of which rose to 1.7 percent in the 12 months through September, according to the Fed’s preferred gauge of price pressures. He also cited the expanding work force and increasing wages. “All of that is suggesting to me that we’re in a somewhat different situation than at least I thought we were in six or eight, 10 or 12 months ago, where I thought we had more opportunity to create more jobs, get more production in the country” by keeping rates low.

  • Eric Rosengren I felt that the changes in the [November] FOMC statement were well aligned with the notion (and the market perception) of a high likelihood of tightening in December. As a result, I did not dissent.

    [ November 15, 2016 ]

    At the September FOMC meeting, I voted to increase interest rates, arguing that if we waited too long to raise rates we could place at risk the sustainability of the recovery. I was concerned that waiting could risk the need to raise rates faster and more than desired at some point, and I felt that this was a risk that could be reduced by removing a bit of accommodation earlier. At the FOMC meeting earlier this month, however, I felt that the changes in the FOMC statement were well aligned with the notion (and the market perception) of a high likelihood of tightening in December. As a result, I did not dissent.

  • Eric Rosengren Since the unemployment rate is already close to its full employment level, further declines would increase the risk of overshooting what is likely to be a sustainable unemployment rate in the longer run. That outcome could lead at some point to the need for a more rapid removal of monetary policy accommodation.

    [ November 15, 2016 ]

    It is certainly good news that the labor force has grown more rapidly of late, and that workers have been drawn from out of the labor force into employment. But this trend is likely to be limited going forward by the demographic changes in the workforce. As a result, if the economy grows even somewhat faster than potential, as most forecasters are expecting, the corresponding increases in employment are likely to be accompanied by further declines in the unemployment rate. Since the unemployment rate is already close to its full employment level, further declines would increase the risk of overshooting what is likely to be a sustainable unemployment rate in the longer run. That outcome could lead at some point to the need for a more rapid removal of monetary policy accommodation.

  • James Bullard You would have to have a surprise at this point to stop a December rate hike.

    [ November 15, 2016 ]

    "You would have to have a surprise I think at this point" to stop a December rate increase, Bullard told reporters after the speech.

  • Stanley Fischer I think many members of Open Market Committee and Federal Reserve Board have commented that it would be useful to have a more expansionary fiscal policy. These statements were made over several months recently. I'm on record with that as having believed that.

    [ November 11, 2016 ]

    I think many members of Open Market Committee and Federal Reserve Board have commented that it would be useful to have a more expansionary fiscal policy. These statements were made over several months recently. I'm on record with that as having believed that.

  • Stanley Fischer In my view, the prospects of a continued steady expansion in the U.S. economy are maximized to the extent that we proceed with a gradual removal of accommodation.

    [ November 11, 2016 ]

    Fischer said the Fed was "reasonably close" to achieving its employment and inflation goals, and the case for tightening monetary policy "quite strong" as a result.

    "In my view, the prospects of a continued steady expansion in the U.S. economy are maximized to the extent that we proceed with a gradual removal of accommodation," Fischer said. He added not doing so runs the risk of having to tighten more abruptly later on.

  • James Bullard I conclude that a single 25-basis-point increase in the policy rate—from 38 to 63 basis points—will get us very close to the recommended Taylor rule value over the forecast horizon.

    [ November 10, 2016 ]

    I conclude that a single 25-basis-point increase in the policy rate—from 38 to 63 basis points—will get us very close to the recommended Taylor rule value over the forecast horizon.