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Recent FedSpeak Highlights

  • Jerome H. Powell I do not see data suggesting that we are behind the curve.

    [ February 22, 2017 ]

    I expect the economy to continue broadly along its current path, which implies further labor market tightening and inflation edging closer to 2 percent. On this path, unemployment would decline modestly below current estimates of the natural rate and remain there for some time. I see that as a desirable outcome and do not see data suggesting that we are behind the curve. In recent years, the economy has faced significant downside risks, particularly from weak global conditions. The Committee has been quite patient, and I believe that has served us well. But risks now seems to me to be more in balance. Going forward, I see it as appropriate to gradually tighten policy as long as the economy continues to behave roughly as expected.

  • Loretta J. Mester We certainly never want to surprise the market.

    [ February 21, 2017 ]

    BLOOMBERG: At just 36% [probability] of a March hike [being priced in by the market], would you be comfortable moving next month?

    MESTER:  Again, the market is always going to have a probability of what they think the Fed’s going to do.  Our job is to be as transparent about the rationale of our policy path.  We certainly never want to surprise the market… But I think most people, when they’re thinking about the U.S. economy, see it on a pretty good and sound footing.

  • Patrick Harker I would not take March off the table at this point. We'll have to see how it plays out in the next few weeks.

    [ February 20, 2017 ]

    "I would not take March off the table at this point. We'll have to see how it plays out in the next few weeks," he told Market News International in an exclusive interview Friday. "I don't think we're behind the curve now, but it is something I am worried about."

    ...

    "Since you can't forecast perfectly, I am very supportive of a gradual path of removing accommodation, but gradual means we have to keep moving along the path," Harker said.

    The Fed has stated its inflation goal is symmetric, so an overshoot of somewhere around 50 basis points on either side of 2% is "fine," Harker indicated, though it's less about the hard numbers and more "what you're feeling in terms of the momentum. If you're starting to feel it's accelerating, then you have to take action."

    A near-term litmus test for that momentum is the PCE report due out March 1, he said.

  • Loretta J. Mester I'm comfortable that inflation is near its goal and moving toward its goal... I'd be comfortable with an increase in the funds rate at this point, if the economy keeps going the way it's going.

    [ February 19, 2017 ]

    In a speech in Singapore, Mester, seen as one of the more hawkish Fed officials, said the economy was on a "sound footing". She also cautioned against asking the central bank to solve problems beyond its control, such as low productivity growth.

    "We did have a temporary oil price shock which held down inflation, we had the dollar appreciation which held down inflation. Those have passed through and the trend in inflation is, it's moving up," Mester said during a Q&A session with the audience after her speech at a central banking seminar in Singapore.

    "So I'm comfortable that inflation is near its goal and moving toward its goal... I'd be comfortable with an increase in the (federal) funds rate at this point, if the economy keeps going the way it's going."

  • Stanley Fischer From Bloomberg: In the interview, Fischer noted that wage growth has “started happening,” calling the incoming data on pay “not far off of where we thought it would be.”

    [ February 16, 2017 ]

    In the interview, Fischer noted that wage growth has “started happening,” calling the incoming data on pay “not far off of where we thought it would be.”

  • Dennis Lockhart There is some exceeding of expectations going on.

    [ February 16, 2017 ]

    In light of recent strong gains in consumer price inflation and continued vigor in hiring, "there is some exceeding of expectations going on," Mr. Lockhart said in a Wall Street Journal interview ahead of his retirement from the bank at the end of the month.

    "I don't think there is an imperative to move in March, but I know it's a live meeting" and eligible for action, Mr. Lockhart said. "If I were part of the decision, I'd find myself persuadable about three moves," but he added that so far, he is still "largely comfortable" with expecting just two increases.

  • William C. Dudley To the extent that we do decide at some point in the future to taper or end reinvestments, that will also be a way of removing accommodation, so that will be a bit of a substitute for raising short term interest rates.  That might actually stretch out the process of [rate hikes].

    [ February 15, 2017 ]

    Forecasts from Fed officials suggest three rate hikes are expected this year, at which point they could consider to begin trimming the $4.5-trillion portfolio of bonds the central bank amassed in the wake of the financial crisis.

    Asked about this timing, Dudley said he would want to delay shrinking the portfolio until he is more confident that rate cuts would not be needed.

    "To the extent that we do decide at some point in the future to taper or end reinvestments (of maturing bonds), that will also be a way of removing accommodation, so that will be a bit of a substitute for raising short term interest rates," he said.

    "So ... that might actually stretch out the process of" rate hikes, he added.

  • James Bullard We have the one increase this year. I'm a little agnostic about timing on that... Given the numbers on the economy I see I think we can afford to wait until later in the year to make our move.

    [ February 15, 2017 ]

    Rates just aren't that high globally so you don't have to do as much in this environment to keep inflation under control. So we think we're actually in pretty good shape. We have the one increase this year. I'm a little agnostic about timing on that.  We'll see how that evolves as we go through the year.

    Given the numbers on the economy I see I think we can afford to wait until later in the year to make our move. [The March meeting] is only a couple of weeks away and obviously Congress has to grind through the legislative process.

  • Eric Rosengren It is my view that it will likely be appropriate to raise short-term interest rates at least as quickly as suggested by the Fed’s current SEP median forecast, and possibly even a bit more rapidly than that forecast.

    [ February 15, 2017 ]

    With the economy at or approaching both elements of the Federal Reserve’s dual mandate (price stability and maximum sustainable employment), it is my view that it will likely be appropriate to raise short-term interest rates at least as quickly as suggested by the Fed’s current SEP median forecast, and possibly even a bit more rapidly than that forecast. Importantly, if GDP is growing faster than potential and we reach both elements of the dual mandate, the Federal Reserve risks “overshooting,” potentially jeopardizing the very significant progress of the U.S. economy since the financial crisis.

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

    [ February 15, 2017 ]

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

  • Daniel K. Tarullo When someone comes and tells you we’ve solved the too-big-to-fail problem, that’s when you should begin to get worried.

    [ February 15, 2017 ]

    “When someone comes and tells you we’ve solved the too-big-to-fail problem, that’s when you should begin to get worried,” said Tarullo, who said last week that he plans to step down as a Fed governor in April.

    He said the rules overhaul inspired by the Dodd-Frank Act “should have durability,” though it’s “far too early to tell” what will come of the anti-regulation rhetoric from President Donald Trump and his administration.

    Tarullo, who spearheaded the push to make banks safer after the crisis, said vulnerabilities remain. He said more work must be done to enable big banks to fail without endangering their peers, and pointed to hazards related to the types of bank funding that are susceptible to runs.

  • Dennis Lockhart What I now detect is simply that the reality of crafting those policies may take a little longer than perhaps many believed a few weeks ago. So their impact on the economy could well come later rather than sooner.

    [ February 14, 2017 ]

    Lockhart said the chief distinction between policymakers who foresee two versus three rates hikes this year hinges on the direction of the new administration. So far, he said, it seems that any boost to growth may come later.

    "What I now detect is simply that the reality of crafting those policies may take a little longer than perhaps many believed a few weeks ago. So their impact on the economy could well come later rather than sooner," Lockhart said.

    More From:

    See Also:

    Source:

    http://www.reuters.com/article/us-usa-fed-lockhart-idUSKBN15T2MC?il=0

    Venue:

    Huntsville Rotary Club and the Greater Huntsville Rotary Club
  • Janet L. Yellen Waiting too long to remove accommodation would be unwise...  At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate

    [ February 14, 2017 ]

    As I noted on previous occasions, waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession. Incoming data suggest that labor market conditions continue to strengthen and inflation is moving up to 2 percent, consistent with the Committee's expectations. At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.

    ...

    The Committee's view that gradual increases in the federal funds rate will likely be appropriate reflects the expectation that the neutral federal funds rate--that is, the interest rate that is neither expansionary nor contractionary and that keeps the economy operating on an even keel--will rise somewhat over time. Current estimates of the neutral rate are well below pre-crisis levels--a phenomenon that may reflect slow productivity growth, subdued economic growth abroad, strong demand for safe longer-term assets, and other factors. The Committee anticipates that the depressing effect of these factors will diminish somewhat over time, raising the neutral funds rate, albeit to levels that are still low by historical standards.

  • Jeffrey Lacker My own view, as I’ve said, is that the magnitude of the gap suggests that rates need to rise more briskly than markets now seem to expect. And the elevated uncertainty now surrounding fiscal policy, particularly the potential for substantial fiscal stimulus, suggests that our next increase should come sooner rather than later in order to reduce the risks associated with having to raise rates more rapidly later on.

    [ February 14, 2017 ]

    I have been arguing for some time that the Fed’s interest rate target is exceptionally low and that upward adjustment is needed.7 I have based that in part on the behavior of benchmarks that capture the historical behavior of interest rates — that is, how policy rates respond to inflation and employment — during times when monetary policy has been relatively effective. These benchmarks, often referred to as “policy rules,” come in slightly different formulations and are useful for assessing the stance of monetary policy. Currently, almost all of these benchmarks recommend higher interest rates, in most cases substantially higher rates. Some have made the case for versions whose current recommendations lie at the lower end of the range of plausible alternatives and thus align with the current low level of our policy rates.8 That case is not without merit, but there are risks associated with placing too much weight on any one estimate. Taking the range of plausible alternatives into account, my view is that, with unemployment at or below levels corresponding to maximum sustainable employment and with inflation very close to our announced target of 2 percent, significantly higher rates are warranted.

    Historical experience strongly suggests that significant deviation from these benchmarks can increase the risk of adverse outcomes. In particular, delaying interest rate increases when unemployment falls below levels corresponding to full or maximum employment can result in an unanticipated rise in inflation pressures that necessitates relatively sharp upward adjustments in rates. Such rapid adjustments can be hard to calibrate, and they heighten the risk of overdoing it and sending the economy into an unnecessary recession.

    At the present time, I am skeptical of justifications for the large and growing departure of current policy from the policy rule recommendations. My own view, as I’ve said, is that the magnitude of the gap suggests that rates need to rise more briskly than markets now seem to expect. And the elevated uncertainty now surrounding fiscal policy, particularly the potential for substantial fiscal stimulus, suggests that our next increase should come sooner rather than later in order to reduce the risks associated with having to raise rates more rapidly later on. Such an approach would maximize our chance of continuing to benefit from price stability and healthy employment growth.

  • Stanley Fischer Sometimes a monetary policy committee will make a decision that is not consistent with the prescriptions of standard monetary rules--and that may well be the right decision. Further, in modern times, the policy statement of the monetary policy committee will seek to explain why the committee is making the decision it is announcing. The quality of those explanations is a critical part of the policy process, for good decisions and good explanations of those decisions help build the credibility of the central bank--and a credible central bank is a more effective central bank.

    [ February 11, 2017 ]

    [I]n reaching its decision, the Committee will examine the prescriptions of different monetary rules and the implications of different model simulations. But it should never decide what to do until it has carefully discussed the economic logic that underlies its decision. A monetary rule, or a model simulation, or both, will likely be part of the economic case supporting a monetary policy decision, but they are rarely the full justification for the decision. Sometimes a monetary policy committee will make a decision that is not consistent with the prescriptions of standard monetary rules--and that may well be the right decision. Further, in modern times, the policy statement of the monetary policy committee will seek to explain why the committee is making the decision it is announcing. The quality of those explanations is a critical part of the policy process, for good decisions and good explanations of those decisions help build the credibility of the central bank--and a credible central bank is a more effective central bank.

    ...

    And now to the bottom line: The title of my speech is an incomplete quotation of something Paul Samuelson once said. What Samuelson said was this, "I'd rather have Bob Solow than an econometric model, but I'd rather have Bob Solow with an econometric model than without one." And Samuelson, who was a shameless eclectic, would almost certainly have said essentially the same thing about policy rules.

  • Charles L. Evans It's more likely that a rest point for the balance sheet is somewhere north of $1 trillion, maybe, you know, $1.5 trillion.

    [ February 9, 2017 ]

    "It's more likely that a rest point for the balance sheet is somewhere north of $1 trillion, maybe, you know, $1.5 trillion. But we're going to see quite a lot roll off" as assets mature, Evans told a meeting of investors and financial advisors. "We want to withdraw gradually from that."

  • James Bullard It is unlikely that fiscal uncertainty will be meaningfully resolved by the March meeting...  We don’t have to move and we have got a lot of fiscal uncertainty, so why not wait until that gets resolved -- or more clearly resolved? ...adjustments to balance sheet policy might be viewed as a way to normalize Fed policy without relying exclusively on a higher policy rate path.

    [ February 9, 2017 ]

    It is unlikely that fiscal uncertainty will be meaningfully resolved by the March meeting...  We don’t have to move and we have got a lot of fiscal uncertainty, so why not wait until that gets resolved -- or more clearly resolved?

    Adjustments to balance sheet policy might be viewed as a way to normalize Fed policy without relying exclusively on a higher policy rate path...

    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 $4.45 trillion balance sheet. This type of “twist operation” does not appear to have a theoretical basis. A more natural normalization process would allow the entire yield curve to adjust appropriately as normalization proceeds. 
  • Patrick Harker I think March should be considered as a potential for another 25-basis point increase.

    [ February 6, 2017 ]

    "I still am supportive of three rate hikes this year, of course with a major caveat, depending on how the economy evolves and policy, fiscal policy, evolves," Harker told reporters after a speech on the regulation of fintech firms." I think March should be considered as a potential for another 25-basis point increase."
    ...
    "I don’t think we are behind the curve now," Harker added. "I want to make sure we don’t get behind the curve."

  • John Williams From a risk management point of view, there’s an argument to move sooner, rather than wait...  Honestly, I think there’s a lot of potential that this economy is going to perhaps get more of a boost than the [three rate-hike] base case.

    [ February 3, 2017 ]

    The Federal Reserve shouldn't be "too timid" or "delay too long" to raise interest rates, said San Francisco Fed President John Williams on Friday. In an interview on Bloomberg TV, Williams challenged the Wall Street view that a rate hike in March is now off the table given the January jobs report. "I don't agree. All our meetings are live," he said. He also disagreed the Fed needed to wait to see details of Trump's fiscal policy legislation before raising rates. "This economy is proving it can grow at a steady rate without as much monetary stimulus as we've been giving," he said. "We actually can make decisions based on that without knowing what happens in terms of fiscal policy later in the year."

    -------

    “From a risk management point of view, there’s an argument to move sooner, rather than wait,” he said in an interview Friday at the Bloomberg News office in San Francisco.

    “There’s some optionality to moving sooner rather than waiting this year,” he said. “Three rate increases, like I said, it’s a reasonable guess, a reasonable perspective to have as a base case. But honestly, I think there’s a lot of potential that this economy is going to perhaps get more of a boost than the base case.”

    He also noted that there could be arguments for “caution” that would support holding off in March and waiting to collect more information.

  • Charles L. Evans Mr. Evans  told reporters after the speech he anticipates two rate increases this year, but didn't rule out a third.  "The way things are going, I could see three hikes," he said. "I could be comfortable with that." 

    [ February 3, 2017 ]

    Mr. Evans, often known as a "dove" for his preference for accommodative monetary policy, told reporters after the speech he anticipates two rate increases this year, but didn't rule out a third.

    "The way things are going, I could see three hikes," he said. "I could be comfortable with that." 

    ------------------------

    With regard to current risk-management issues, many have made the following argument, and so I’ll just state it briefly. Central bankers have a pretty good handle on how to address rising inflation concerns: Use conventional policies and raise short-term policy interest rates. But when inflation is too low and our policy rate is stuck at the zero lower bound, we struggle to provide adequate accommodation with unconventional policies. Because of this asymmetry, risk-management policies would favor skewing policy today to lower the chances of facing more difficult zero-lower-bound outcomes in the future. I think this strategy is important now. And it will likely continue to be important as we adjust to a low equilibrium interest rate environment. With these considerations in mind, I believe that appropriate policy calls for a slow pace of normalization in order to give the real economy an adequate growth buffer to withstand downside shocks that might otherwise drive us back down to the ZLB.