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Recent FedSpeak Highlights

  • Stanley Fischer We don't think we're in a situation where we have an inflationary bubble or an unsustainable set of prices in the asset markets, but we don't comment on that very much and I shouldn't go on.

    [ October 11, 2017 ]

    We don't think we're in a situation where we have an inflationary bubble or an unsustainable set of prices in the asset markets, but we don't comment on that very much and I shouldn't go on.

  • Esther L. George In hindsight I think [our inflation objective] has proven to be far more challenging than expected both as a communications mechanism and a policy guide… While I still see 2 percent as an appropriate long-run objective for policy, I think it makes sense to evaluate deviations from that objective in a broader context.

    [ October 11, 2017 ]

    In hindsight I think [our inflation objective] has proven to be far more challenging than expected both as a communications mechanism and a policy guide… While I still see 2 percent as an appropriate long-run objective for policy, I think it makes sense to evaluate deviations from that objective in a broader context.

    While I supported the 2012 decision to specify a 2 percent objective for inflation, in hindsight I think it has proven to be far more challenging than expected both as a communications mechanism and a policy guide. Too much focus is placed on achieving this specific numerical target when, in fact, inflation is likely to fluctuate around that target with deviations that occasionally might persist. In fact, the qualitative definition of price stability that guided Volcker and Greenspan rings true today: An inflation rate that does not materially affect the decisions of business or households is an inflation rate that is consistent with price stability. While I still see 2 percent as an appropriate long-run objective for policy, I think it makes sense to evaluate deviations from that objective in a broader context.

  • Robert S. Kaplan What I don’t want to see us do is raise rates so fast that we get an inverted yield curve because history has shown an inverted yield curve has tended to be a precursor to a recession.

    [ October 10, 2017 ]

    Even as the short-term interest rate targeted by the Fed has climbed, the yield on the benchmark 10-year Treasury has fallen, a reversal of what usually happens and a development that Kaplan said he sees as “a little ominous.”

    “I view that as a comment on future economic growth,” Kaplan said at the Stanford Institute for Economic Policy Research. “And what I don’t want to see us do is raise rates so fast that we get an inverted yield curve because history has shown an inverted yield curve has tended to be a precursor to a recession.”

  • James Bullard The December meeting is going to be too early to make a determination on whether inflation is coming back. I don’t see how we can get the data on that. I am getting more concerned that we might make a policy mistake.

    [ October 6, 2017 ]

    “If we go too far in our zeal to normalize we might push inflation expectations down further and that might hinder our ability to hit our target,” Bullard said.

    “The December meeting is going to be too early to make a determination on whether inflation is coming back. I don’t see how we can get the data on that. I am getting more concerned that we might make a policy mistake.”

  • Raphael Bostic If we continue to see strength and that robust energy in the economy, I will be comfortable with a conversation about increasing rates. But we have to wait and see about those things.

    [ October 6, 2017 ]

    If we continue to see strength and that robust energy in the economy, I will be comfortable with a conversation about increasing rates. But we have to wait and see about those things.

  • John Williams Turning to inflation, I feel the agony of Sisyphus.

    [ October 5, 2017 ]

    My own view is that r-star today is around 0.5 percent. Assuming inflation is running at our goal of 2 percent in the future, the typical, or normal short-term interest rate would be 2.5 percent.

    Turning to inflation, I feel the agony of Sisyphus, as core inflation rolled back down the hill after being so near to our 2 percent goal earlier in the year. This low inflation, against a background of steady growth and strong employment, has been attracting a lot of attention from Fed commentators in recent months… [However,] as [temporary] effects wane and the strong economy pushes inflation higher for prices that tend to be sensitive to the economy, I am optimistic that inflation will move up to our 2 percent goal over the next couple of years. As inflation rises and the economic expansion continues, we will be able to move interest rates up to their new normal level.

  • Stanley Fischer We always need to be steeled for the possibility that we need to change course drastically.

    [ October 4, 2017 ]

    [Fischer] leaned against the notion that monetary policy can be conducted solely with formulas or rules.

    “We always need to be steeled for the possibility that we need to change course drastically.”

  • Neel Kashkari Job growth, wage growth, inflation and inflation expectations are all likely somewhat lower than they would have been had the FOMC not removed accommodation over the past three years.

    [ October 2, 2017 ]

    Of the five possible explanations I mentioned for low inflation, four of them (global labor supply, technology development, more domestic labor slack and falling inflation expectations) all suggest there is no reason to raise rates until we start to see wages and inflation climb back to target. The only explanation that would potentially call for further policy tightening is the transitory factor explanation. But the longer low inflation persists (here and around the world), the more tenuous that story becomes.

    Job growth, wage growth, inflation and inflation expectations are all likely somewhat lower than they would have been had the FOMC not removed accommodation over the past three years. Allowing inflation expectations to slip further will mean that we will have less powerful tools to respond to a future economic downturn. I believe these are significant costs that we must consider as we contemplate the future path of policy.

  • Patrick Harker From CNBC: Patrick Harker said Friday he still has "penciled in" an interest rate hike in December, and three more rate hikes next year, despite weak inflation.

    [ September 29, 2017 ]

    Patrick Harker said Friday he still has "penciled in" an interest rate hike in December, and three more rate hikes next year, despite weak inflation.

    "Labor markets feel really tight," Harker said at a conference in Philadelphia on Fintech, adding that it was appropriate for the Fed to take a pause for now in raising rates as it begins to shrink its $4.5 trillion balance sheet.

  • Janet L. Yellen Inflation data is very noisy, month-to-month, hopefully this isn’t too much in the weeds -- but there is residual seasonality in inflation and inflation data, which will tend to result in lower inflation readings in the second half of the year.

    [ September 26, 2017 ]

    From Bloomberg News:

    In response to a question about what data the Fed might look for before it adjusts its path, Yellen answered, "Inflation data is very noisy, month-to-month, hopefully this isn’t too much in the weeds -- but there is residual seasonality in inflation and inflation data, which will tend to result in lower inflation readings” in the second half of the year.

    It could be interesting if we see that trotted out a reason to look through soft readings (if there are soft readings) going forward.

    From a footnote to Yellen's speech:

    In general, price changes measured over a few months tend to be noisy, even when measured on a core or trimmed-mean basis. For this reason, the FOMC usually focuses on the growth rate of PCE prices over the previous 12 months, which smooths through the volatility in the monthly price data. This approach also sidesteps distortions in the monthly data associated with residual seasonality; these distortions are likely to hold down month-to-month changes in prices over the balance of the year (see Peneva, 2014). That said, 12‑month rates of inflation will continue to be held down through early 2018 by the unusually weak monthly readings on price changes recorded in early 2017.

  • Raphael Bostic My staff's own projections indicate continued strength in the economy and progress toward the FOMC's inflation objective as the year concludes and we move into 2018. I think clear evidence of this path could certainly be consistent with an additional rate hike this year.

    [ September 26, 2017 ]

    I conclude that monetary policy is not currently overly easy. But this is not a statement as to whether or not further adjustments in policy are required. My staff's own projections indicate continued strength in the economy and progress toward the FOMC's inflation objective as the year concludes and we move into 2018. I think clear evidence of this path could certainly be consistent with an additional rate hike this year.

  • Janet L. Yellen It would be imprudent to keep monetary policy on hold until inflation is back to 2 percent.

    [ September 26, 2017 ]

    How should policy be formulated in the face of such significant uncertainties? In my view, it strengthens the case for a gradual pace of adjustments. Moving too quickly risks overadjusting policy to head off projected developments that may not come to pass. A gradual approach is particularly appropriate in light of subdued inflation and a low neutral real interest rate, which imply that the FOMC will have only limited scope to cut the federal funds rate should the economy be hit with an adverse shock.  But we should also be wary of moving too gradually. Job gains continue to run well ahead of the longer-run pace we estimate would be sufficient, on average, to provide jobs for new entrants to the labor force. Thus, without further modest increases in the federal funds rate over time, there is a risk that the labor market could eventually become overheated, potentially creating an inflationary problem down the road that might be difficult to overcome without triggering a recession. Persistently easy monetary policy might also eventually lead to increased leverage and other developments, with adverse implications for financial stability. For these reasons, and given that monetary policy affects economic activity and inflation with a substantial lag, it would be imprudent to keep monetary policy on hold until inflation is back to 2 percent.

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/newsevents/speech/yellen20170926a.htm

    Venue:

    NABE Annual Economic Policy Conference
  • Janet L. Yellen The FOMC's outlook depends importantly on the view that longer-run inflation expectations have been stable for many years at a level consistent with PCE price inflation that will average around 2 percent in the longer run.

    [ September 26, 2017 ]

    The FOMC's outlook depends importantly on the view that longer-run inflation expectations have been stable for many years at a level consistent with PCE price inflation that will average around 2 percent in the longer run. 

    More From:

    See Also:

    Source:

    https://www.federalreserve.gov/newsevents/speech/yellen20170926a.htm

    Venue:

    Federal Reserve Bank of Cleveland
  • Charles L. Evans Inflation has been lower than the FOMC’s 2 percent target for too long, and there is little in the recent data to suggest that inflation will soon rise to target. So I believe maintaining policy accommodation until we are more demonstrably on a sustainable path to 2 percent is key for reaching that objective—and for maintaining the credibility of our price stability goal.

    [ September 25, 2017 ]

    The fundamentals for economic growth in the U.S. are sound, and we are close to our full employment goal. But inflation has been lower than the FOMC’s 2 percent target for too long, and there is little in the recent data to suggest that inflation will soon rise to target. So I believe maintaining policy accommodation until we are more demonstrably on a sustainable path to 2 percent is key for reaching that objective—and for maintaining the credibility of our price stability goal.

  • William C. Dudley I expect inflation will rise and stabilize around the FOMC’s 2 percent objective over the medium term. In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually.

    [ September 25, 2017 ]

    With a firmer import price trend and the fading of effects from a number of temporary, idiosyncratic factors, I expect inflation will rise and stabilize around the FOMC’s 2 percent objective over the medium term. In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually.

  • Robert S. Kaplan I’ve got an open mind about December.

    [ September 22, 2017 ]

    “I’ve got an open mind about December, but I want to take a little bit more time” to observe economic data, said Mr. Kaplan, referring to the Fed’s final scheduled policy meeting of the year, on Dec. 12-13, during remarks at an energy conference here.

  • John Williams My own view is that [low inflation] has not been that baffling.

    [ September 22, 2017 ]

    "My own view is that it has been not that baffling," Mr. Williams said, referring to low inflation. He noted that prices in some sectors such as health care and cellular services have been hit by downward movements, and that prices typically reflecting developments in the economy have been rising.

    "With a strong economy, history teaches us that inflation tends to move up," he said.

    Assuming the U.S. remains on a path of rising inflation and modest economic growth -- Mr. Williams expects 2.5% gross domestic product growth this year and slightly less than 2% in 2018 -- the Fed should be able to raise interest rates gradually toward what he sees as the "normal" longer-term policy rate of about 2.5%.

    That could include another rate increase this year and around three in 2018, he said, which is in line with projections released Wednesday by the Fed.

  • William C. Dudley [Our early estimates would suggest] a normalized balance sheet size of, perhaps, $2.4 trillion to $3.5 trillion in the early 2020s.

    [ September 7, 2017 ]

    This leads us to the next question:  Assuming that a floor system is retained, what amount of reserves will be needed in the banking system so that day-to-day open market operations are not necessary to keep the federal funds rate within its target range?

    As a rough starting point, we have suggested that the necessary amount of excess reserves could be in a range of $400 billion to $1 trillion.   Coupled with uncertainty about the likely growth in other factors, such as currency outstanding, this implies a normalized balance sheet size of, perhaps, $2.4 trillion to $3.5 trillion in the early 2020s.  

  • Loretta J. Mester There hasn’t been enough evidence that inflation is on a different trajectory now. This gradual path balances the risks on both sides, and I would stick with it longer.

    [ September 7, 2017 ]

    “The conditions remain in place for inflation to gradually return over the next year or so to our symmetric goal of 2 percent on a sustained basis,” Mester, one of the more hawkish officials at the U.S. central bank, said in a speech Thursday in Pittsburgh.

    “There hasn’t been enough evidence that inflation is on a different trajectory now,” she said. “This gradual path balances the risks on both sides, and I would stick with it longer.”

  • Neel Kashkari These premature rate hikes that we are embarking on, they’re not free, and I think we need to remind ourselves of that.

    [ September 5, 2017 ]

    “It’s very possible that our rate hikes over the past 18 months are leading to slower job growth, leaving more people on the sidelines, leading to lower wage growth, and leading to lower inflation and inflation expectations,” Kashkari said Tuesday during a talk at the University of Minnesota in Minneapolis. “These premature rate hikes that we are embarking on, they’re not free, and I think we need to remind ourselves of that.”