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Recent FedSpeak Highlights

  • William C. Dudley If and when we decide to begin to normalize the balance sheet we might actually decide at the same time to take a little pause in terms of raising short-term interest rates.

    [ March 31, 2017 ]

    "It wouldn't surprise me if some time later this year or some time in 2018, should the economy perform in line with our expectations, that we will start to gradually let the securities mature rather than reinvesting them," Dudley, a close ally of Fed Chair Janet Yellen, said on Bloomberg TV.

    "If we start to normalize the balance sheet, that's a substitute for short-term rate hikes because it would also work in the direction of tightening financial conditions," he said. "If and when we decide to begin to normalize the balance sheet we might actually decide at the same time to take a little pause in terms of raising short-term interest rates."

  • William C. Dudley I don’t think we are removing the punch bowl, yet.  We’re just adding a bit more fruit juice. 

    [ March 30, 2017 ]

    William McChesney Martin, the ninth chair of the FOMC, once famously opined that the Federal Reserve is “in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”  I don’t think we are removing the punch bowl, yet.  We’re just adding a bit more fruit juice. 

  • John Williams I think [balance sheet] normalization will start later this year.

    [ March 30, 2017 ]

    [The challenge for the FOMC] is really trying to get that normalization process [started] both in terms of interest rates, but also our balance sheet, which I think that normalization will start later this year, getting that process underway.

  • Eric Rosengren (Asset markets are) a little rich relative to where the averages have been.

    [ March 29, 2017 ]

    (Asset markets are) a little rich relative to where the averages have been.

  • John Williams As we move forward, I see the unemployment rate nudging down a bit further, ultimately bottoming out near 4½ percent by the end of the year.

    [ March 29, 2017 ]

    As we move forward, I see the unemployment rate nudging down a bit further, ultimately bottoming out near 4½ percent by the end of the year.

  • Charles L. Evans The FOMC’s long-run price stability goal is 2 percent for overall PCE inflation. But it is important to remember that we strive for sustained symmetric achievement of 2 percent.

    [ March 29, 2017 ]

    The rise in energy prices probably will carry headline PCE inflation higher only for a time. It is more likely to fall back to the underlying rate as measured by core inflation. Today that rate is 1.7 percent. And I don’t expect it to achieve 2 percent until 2019.

    The FOMC’s long-run price stability goal is 2 percent for overall PCE inflation. But it is important to remember that we strive for sustained symmetric achievement of 2 percent.

    I still worry about darker scenarios in which we return to the zero lower bound (ZLB). That is one reason why I think it’s so important to get inflation and inflation expectations up to target, so that we have maximum rate cutting capacity.

  • Charles L. Evans If I thought that I was inclined to four rate hikes for 2017 I would presumably be seeing a much stronger lift in inflation.

    [ March 27, 2017 ]

    Evans said he saw three rate hikes in 2017 as "plausible", but added that two or four increases were also a possibility.

    "I don't see the data, I don't have the confidence," Evans said, asked whether there was a strong case for a fourth rate hike. "If I thought that I was inclined to four rate hikes for 2017 I would presumably be seeing a much stronger lift in inflation, I think it would be accompanied by a meaningful increase in long term inflation expectations."

  • James Bullard I think [three rate hikes this year] is potentially overkill.

    [ March 24, 2017 ]

    “I think [three rate hikes this year] is potentially overkill,” the St. Louis Fed president said Friday, referring to the central bank’s projection for future rate increases. “It’s not necessary to raise rates that quickly if the goal is to keep inflation near target and keep unemployment between 4.5 and 5 percent,” he told reporters in Memphis, Tennessee.

  • Robert S. Kaplan I would be advocating that we allow both [the Fed's MBS and Treasury holdings] to run off.

    [ March 23, 2017 ]

    Federal Reserve Bank of Dallas President Robert Kaplan said the central bank should roll off both mortgage-backed securities and Treasury holdings when it begins to let its balance sheet shrink.

    “Each is a different market, the sizes and daily market volumes are different in each” and “I would be advocating that we allow both of those to run off,” Kaplan said, speaking with reporters after an event in Chicago.

    “We just have to tailor our plan to each of those types of securities,” he said, adding: “Our plan should be to address both of those types of securities, and have an announced plan for how we’ll allow each of those to run off.”

    “We’re approaching a period where we’ll have made some further progress and we’ll be able to make an announcement on our plans for the balance sheet,” Kaplan said Thursday.

    Asked whether he’s concerned about the possibility of a market dislocation in response to the Fed’s strategy for the balance sheet, Kaplan said “it’s very important that we make a clear announcement, when we do” and that “it’s very critical that our plan for the balance sheet is patient and gradual, and try to minimize disruptions.”

  • John Williams Three or even four increases as your total makes sense.

    [ March 23, 2017 ]

    “I think the economy is in a good place right now. Growth has been basically a little bit above trend,” Mr. Williams told The Wall Street Journal during an interview.

    “Three or even four increases as your total makes sense,” he said.

    He said his projections are “not conditional on something happening,” such as whether new government policies stimulate faster growth, but rather on the state of the economy.

    He added, however, that if new fiscal policies do spur growth, that would strengthen the argument for four rather than three moves this year.

    Mr. Williams said he didn’t know when the next rate increases might occur, but added, “Doing them earlier positions monetary policy that if we do get either very positive news on the economy in terms of data or maybe news of significant fiscal stimulus, then you’re positioned to move a little bit quicker.”

  • Loretta J. Mester In my view, if economic conditions evolve as I anticipate, I would be comfortable changing our reinvestment policy this year.

    [ March 21, 2017 ]

    As Chair Yellen mentioned in her press briefing, the FOMC is discussing its reinvestment policy, but no decisions have been made. In my view, if economic conditions evolve as I anticipate, I would be comfortable changing our reinvestment policy this year. I view this as consistent with our principles of policy normalization and our statement that we anticipate continuing reinvestments “until normalization of the level of the federal funds rate is well under way.” Ending reinvestments is a first step toward reducing the size of the balance sheet and returning its composition to primarily Treasury securities over time—a welcome acknowledgment that the economy and policy are transitioning back to normal.

  • Patrick Harker For me, we should wait until we’re well north of 1% [before addressing the balance sheet].

    [ March 20, 2017 ]

    CNBC: Is the Fed currently discussing a plan for its balance sheet?

    HARKER: Yeah, we are discussing it.  For me, we should wait until we’re well north of 1% [before addressing the balance sheet].

    CNBC: Can I nail you down a little bit on that?  Is “well north” of 1% 1 ½%?

    HARKER: Somewhere in that range… I don’t know yet.

  • Neel Kashkari Once the data do support a tightening of monetary policy, I would prefer the next policy move by the FOMC to be publishing a detailed plan that explains how and when we will begin to normalize our balance sheet.

    [ March 17, 2017 ]

    Once the data do support a tightening of monetary policy, I would prefer the next policy move by the FOMC to be publishing a detailed plan that explains how and when we will begin to normalize our balance sheet. Once we put that plan in place, and we see the market reaction to it, we can return to using the federal funds rate to remove monetary accommodation when the data call for it.

  • Janet L. Yellen At our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.

    [ March 3, 2017 ]

    In short, we currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect. Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.

    Nonetheless, as we have said many times--and as my discussion today demonstrates--monetary policy cannot be and is not on a preset course. As in 2015 and 2016, the Committee stands ready to adjust its assessment of the appropriate path for monetary policy if unanticipated developments materially change the economic outlook.

  • Jerome H. Powell I think the case for a rate increase in March has come together, and I do think it's on the table for discussion.

    [ March 2, 2017 ]

    The economy has behaved pretty much as we expected. In the meantime, the balance of risks, which has been to the downside in recent years, has really shifted to being even and perhaps lifted to the upside because of the possibility and the likelihood of some fiscal action. So you put all that together, and I think the case for a rate increase in March has come together, and I do think it's on the table for discussion.

    I wrote down three rate increases in the September Summary of Economic Projections. That still feels about right to me. That's a gradual path by any historic measure. And it does feel to me that is about right, but it is really going to depend on what the economy does. Could be higher, could be lower.

  • Lael Brainard The economy appears to be at a transition.  Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path.

    [ March 1, 2017 ]

    The economy appears to be at a transition. We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing, and risks to the outlook are as close to balanced as they have been in some time. Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path.

  • James Bullard We should be allowing the balance sheet to normalize naturally now, during relatively good times, in case we are forced to resort to balance sheet policy in a future downturn.

    [ February 28, 2017 ]

    “Now that the policy rate has been increased, the FOMC may be in a better position to allow reinvestment to end or to otherwise reduce the size of the balance sheet,” he said. “Adjustments to balance sheet policy might be viewed as a way to normalize Fed policy without relying exclusively on a higher policy rate path.”

    In addition, he noted that current policy is distorting the yield curve. “The current FOMC policy is putting some upward pressure on the short end of the yield curve through actual and projected movements in the policy rate. At the same time, current policy is putting downward pressure on other portions of the yield curve by maintaining a $4.47 trillion balance sheet,” he explained. Bullard added that a more natural normalization process would allow the entire yield curve to adjust appropriately as normalization proceeds.

    “The effects of balance sheet policy are uncertain, but are often attributed to a signaling effect that the FOMC intended to stay ‘lower for longer’ on the policy rate,” Bullard said. “That signaling effect may be important when the balance sheet is rising and the policy rate is near zero, but would not exist when the balance sheet is shrinking and the policy rate has moved away from the zero lower bound.”

    He added, “As for the final size of the balance sheet, few would argue that the current $4.47 trillion level is appropriate. Ending reinvestment would still leave the balance sheet very large for years.”

    Permitting some adjustments to the balance sheet may also create balance-sheet “policy space,” Bullard noted.

    “Some have argued that the size of the balance sheet should not be reduced until the policy rate is high enough that the policy rate can be reduced appropriately should a recession develop. This is sometimes called ‘policy space,’” he explained.

    Furthermore, the same “policy space” argument can be made for the size of the balance sheet, he said, adding, “we should be allowing the balance sheet to normalize naturally now, during relatively good times, in case we are forced to resort to balance sheet policy in a future downturn.”

  • William C. Dudley The case for monetary policy tightening has become a lot more compelling.

    [ February 28, 2017 ]

    We have seen a "very large" rise in household and business confidence and "very buoyant" financial markets since the election, "and we have the expectation that fiscal policy will probably move in a more stimulative direction," Dudley said on CNN.

    "The case for monetary policy tightening has become a lot more compelling.”

  • Patrick Harker I see three hikes as appropriate for 2017, assuming things stay on track.

    [ February 28, 2017 ]

    I see three hikes as appropriate for 2017, assuming things stay on track.

  • Robert S. Kaplan I think you need to take advantage of windows when they present themselves... If we think we're moving close to our dual mandate objectives, we should take opportunities to remove some amount of accommodation in the context of a patient, gradual path of rates.

    [ February 27, 2017 ]

    CNBC: Some people have criticized the Federal Reserve for missing opportunities to hike. There were times you could have done it and you held back because you were afraid that there would be bad economic outcomes that didn't come to pass. Does this look like one of those opportunities for you, March, an opportunity you shouldn't miss?

    KAPLAN: I actually think we're now much closer to meeting our employment and inflation objectives. And yeah, I think you need to take – once you've decided that, I think you need to take advantage of windows when they present themselves because you could have exogenous factors, you could have market events that could give us some pause. So I think if we think we're moving close to our dual mandate objectives, we should take opportunities to remove some amount of accommodation in the context of a patient, gradual path of rates.