TextCEsInFinance/fomc-communication

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1,247	An important element in interpreting financial market prices is the identification of the risk premiums they contain.	2,004	2	neutral
1,248	That central bank independence promotes lower inflation in developed countries is well-established by the economic literature.	2,002	2	neutral
1,249	Members also agreed that there was only a remote possibility that the process of disinflation would cumulate to the point of a decline for an extended period in the general price level.	1,998	2	neutral
1,250	The Committee took these actions to provide a somewhat more accommodative policy in response to muted inflation pressures and the risks to the outlook I mentioned earlier.	2,005	0	dovish
1,251	Conclusion The United States productivity growth spurt, realized to a much lesser extent around the world, can be attributed largely to a combination of an investment boom and a technological revolution.	2,008	0	dovish
1,252	When, when you get to—in, in the forecast, all of that, you know, supply and demand sides of the economy adapt.	2,019	2	neutral
1,253	And you know, we haven’t yet—we just touched 2 percent core inflation, to pick one measure—just touched it for a few months, and then we’ve fallen back.	2,022	0	dovish
1,254	But in terms of just targeting growth, you know, I think—I actually think our dual mandate works very well, which is maximum employment and stable prices.	2,018	2	neutral
1,255	To be clear, when I say "risk premium" I mean the additional compensation required by investors for holding a risky security--that is, one with uncertain returns--above the compensation that would be demanded by risk-neutral investors who care only about expected returns.	2,022	2	neutral
1,256	The staff's outlook for inflation was broadly unchanged.	2,005	2	neutral
1,257	He was concerned that the flattening yield curve was partly due to falling longer-term inflation expectations or a lower neutral real rate of interest.	2,019	0	dovish
1,258	In any event, it was clear that forecasts in recent years typically had overstated the rise in inflation, and a great deal of uncertainty surrounded the extent to which productivity gains and other factors, some unspecified, might continue to hold down inflation in a period of robust economic growth and relatively tight labor markets.	2,011	2	neutral
1,259	A couple of participants pointed to the decline in credit spreads to relatively low levels by historical standards; one of these participants noted the risk of either a sharp rise in spreads, which could have negative repercussions for aggregate demand, or a continuation of the decline in spreads, which could undermine financial stability over time.	2,011	0	dovish
1,260	In particular, the Committee noted that it would respond as necessary to maintain price stability.	2,021	1	hawkish
1,261	Rather than rely on Fed watchers employed by primary dealers to read the tea leaves of our daily interventions, we inform everyone, openly, and take responsibility for the level of short-term interest rates.	2,005	2	neutral
1,262	In such an environment, a central bank mandated to pursue price stability can be flexible according to the circumstances, while one with a numerical target may need to obtain formal modification of its objectives.	2,021	2	neutral
1,263	This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. "	2,015	2	neutral
1,264	And what we—it looks like we’re seeing a slowdown in the rate of growth.	2,022	0	dovish
1,265	Nonetheless, all but one of the members believed that in light of the uncertainties about the economic outlook, an immediate policy tightening was not needed in the absence of firmer indications that inflationary pressures might be emerging.	2,014	1	hawkish
1,266	A couple of participants indicated that they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation.	2,011	2	neutral
1,267	Monetary Policy Spillovers Flow in Both Directions There is a vast literature that documents the existence of international spillovers from U.S. monetary policy, especially to emerging markets (EMs).	2,021	2	neutral
1,268	Later in the period, AFE yields partially rebounded and foreign equity prices fully recovered on some easing of U. S. –China trade tensions, as well as perceptions of reduced political uncertainty in the United Kingdom and Italy.	2,022	2	neutral
1,269	The staff also reduced slightly its forecast of growth next year	2,000	0	dovish
1,270	The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen.	2,013	0	dovish
1,271	Inflation readings available since the April meeting continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and continued decreases in prices of non-energy imports.	2,016	0	dovish
1,272	the very shortest maturities, and with the additional tightening and deceleration in inflation that is expected over coming quarters, the entire real curve will soon move into positive territory.	2,000	1	hawkish
1,273	Some may see a monetary policy that actively addresses episodes of financial instability along the lines that I have just described as promoting excessive risk-taking and thus increasing the probability of future crises.	2,017	1	hawkish
1,274	You know, it says that we will seek to—seek inflation that runs moderately above 2 percent for some time.	2,019	0	dovish
1,275	In some models, these factors can be explicitly tied to observable economic variables, such as inflation; in other models, the factors represent statistical summaries of the data and have no explicit economic interpretations.	2,021	2	neutral
1,276	Similarly, I don't think we yet fully understand the role of Year 2000 preparations in either the late 1990s investment boom or the acceleration in productivity.	2,020	2	neutral
1,277	That apparently has not made its way into prices yet,	2,005	2	neutral
1,278	As always, our actions are guided by our congressional mandate to promote maximum employment and price stability.	2,018	1	hawkish
1,279	But, I would say, overall, we’re trying to sustain the expansion and keep, you know, close to our statutory goals, which are maximum employment and stable prices.	2,014	1	hawkish
1,280	Although some decline in inflation could not be ruled out, persistence of the current degree of tightness in labor markets, consistent with the economy growing at a pace near its potential, could at some point begin to put more pressure on costs and prices, and growth somewhat above potential, which some members saw as a distinct possibility, would be even more likely to produce that result.	2,015	1	hawkish
1,281	There should be able to be an adjustment that would have lower than—perhaps lower-than-expected increases in unemployment—lower than would be expected in the ordinary course of events because the level—the ratio of, of vacancies to unemployed is just out of keeping with historical experience.	2,015	2	neutral
1,282	In a virtuous circle, stable inflation expectations help the central bank to keep inflation low even as it retains substantial freedom to respond to disturbances to the broader economy.	2,021	1	hawkish
1,283	For example, the Stock-Watson indicator and other indicators based on interest rates and spreads signaled the 1990-91 recession very weakly and rather late.	1,997	2	neutral
1,284	Subsequent to monetary union, harmonized consumer prices can be used as the best available measure of inflation in the Euro area.	2,004	2	neutral
1,285	Overall consumer prices increased in July and August at about the second-quarter rate.	2,012	1	hawkish
1,286	Economic data releases were mixed, on balance, over the intermeeting period, but market participants were especially attentive to incoming information on the labor market--most notably, the private payroll figures in the employment report for May, which were considerably weaker than investors expected.	2,016	0	dovish
1,287	Longer-term inflation expectations have remained stable.	2,019	2	neutral
1,288	I will then discuss the prospects for adjusting monetary policy in the manner needed to sustain a strong job market	2,001	1	hawkish
1,289	Nonetheless, on balance, most members currently considered the upside risks to inflation to be a bit less pressing than those on the downside for the next few quarters.	2,019	0	dovish
1,290	One prominent example is with semiconductor producers and their need to dramatically alter the mix of production to meet demands of the high-tech and automotive industries.	2,001	2	neutral
1,291	I look forward, as always, to my conversation with Tim, but first, please allow me to offer a few remarks on the economic outlook, Federal Reserve monetary policy, and our new monetary policy framework.	2,022	2	neutral
1,292	Participants expected that, with further gradual increases in the federal funds rate, economic activity would expand at a solid rate during the remainder of this year and a moderate pace in the medium term, and that labor market conditions would remain strong.	2,008	1	hawkish
1,293	Others indicated that because part of the recent decline in the jobless rate was associated with a reduction in labor force participation, the drop in the unemployment rate likely overstated the overall improvement in the labor market.	2,019	0	dovish
1,294	One prominent example is the work in behavioral finance on how alternative assumptions regarding rationality can affect predictions for asset prices and saving behavior	2,001	2	neutral
1,295	As far as—as the policy rate, what we’ve said is that we will maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals.	2,017	2	neutral
1,296	Inflation-targeting regimes make sense only if the central bank has independent control of the instruments of monetary policy, as holding the central bank responsible for meeting its inflation target is hardly possible otherwise.	1,998	2	neutral
1,297	The run-up in mortgage rates since the latter part of June was expected to curb housing demand to a limited extent in coming months,	1,997	2	neutral
1,299	Survey measures give us an idea of what the average household expects inflation to be in the coming years.	2,005	2	neutral
1,300	The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability. "	2,009	1	hawkish
1,301	Moreover, substantial gains in productivity were muting the effects of rising labor compensation on unit costs, and vigorous competition in numerous markets was continuing to make it very difficult or impossible for business firms to raise their prices to cover rising costs or enhance profit margins.	2,011	1	hawkish
1,302	Broad equity price indexes decreased slightly, on net, as substantial early gains arising from investors' improved perceptions about the inflation outlook and better-than-feared second-quarter earnings were more than offset by later losses arising from expectations that the Committee would follow a more restrictive policy than previously expected.	2,011	1	hawkish
1,303	Another reason for the reliance on judgment in the forecasting process is the practical requirement that the forecast for inflation be consistent with the staff's overall view of the economy, including the forecasts for key economic variables such as wages, interest rates, and consumption spending.	2,022	2	neutral
1,304	Job gains had been solid, on average, in recent months, and the unemployment rate had remained low.	2,005	1	hawkish
1,305	Members noted that they expected to maintain this target range until they were confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals.	1,997	2	neutral
1,306	The unemployment rate declined in May and , 2020 June but, at 11.1 percent, remains far above its level before the outbreak and greater than the Chair Powell’s Press Conference FINAL peak during the Global Financial Crisis.	2,012	0	dovish
1,307	Employment continued to expand unevenly,	2,005	2	neutral
1,308	sustained outsized gains in productivity could further damp hiring.	2,003	0	dovish
1,309	In the residential real estate sector, home sales and construction had increased from very low levels, and house prices appeared to be stabilizing.	2,009	2	neutral
1,310	In fact, it’s already—it’s already understood, I think, that—that there’s more—even though we’re at 3½ percent unemployment, there’s actually more slack out there, in a sense.	2,022	0	dovish
1,311	What monetary policy affects, primarily, is the state of the business cycle, the amount of excess unemployment or the extent of recession in the economy.	2,017	2	neutral
1,312	However, with the contraction in housing activity expected to abate this year, the pace of economic growth was anticipated to edge back up to a level that was close to the staff's estimate of potential output growth by the end of 2007 and to remain in that same range throughout 2008.	2,008	2	neutral
1,313	We take the level of the stock market into account when we consider the economic outlook and monetary policy.	2,003	2	neutral
1,314	Factors pointing to potentially higher inflation included increased pressures on food prices stemming from disappointing harvests in some areas and relatively low grain supplies.	2,014	1	hawkish
1,315	In contrast, under a price-level-targeting scheme, continuing deflation combined with an upward-sloping path for the price-level target causes the size of the price-level gap to increase over time.	2,022	0	dovish
1,316	For 1998, the Committee agreed on a tentative basis to set the same ranges as in 1997 for growth of the monetary aggregates and debt, measured from the fourth quarter of 1997 to the fourth quarter of 1998.	2,002	2	neutral
1,317	An anticipated sharp slowdown in the pace of inventory accumulation also would damp domestic production as the growth of stocks was brought into balance with the expected more moderate trajectory of final sales.	2,017	2	neutral
1,318	Policy tightening started last year, as emerging markets including Mexico and Brazil increased rates substantially amid expectations of accelerating inflation.	2,002	1	hawkish
1,319	Indeed, most anticipated that inflation will slow for a time to rates somewhat lower than those they judge consistent with the dual goals of price stability and maximum employment, initially reflecting the recent declines in the prices of energy and other commodities and later responding to several years of substantial economic slack.	2,022	0	dovish
1,320	In addition, the May 1, 2019 trimmed mean measures of inflation did not go down as much.	2,022	1	hawkish
1,321	Maintaining low inflation rates reduces the levels of future uncertainties and, hence, increases the scope of investment opportunities.	2,021	1	hawkish
1,322	For example, Kozicki and Tinsley (2001) show that it is far easier to make sense of the term structure of Treasury yields if one assumes that expectations about long-run inflation adjust in a reasonable adaptive manner.	2,004	2	neutral
1,323	We have not focused on whether we meet the liftoff test, because we don’t meet the liftoff test now because we’re not at maximum employment.	2,020	0	dovish
1,324	Through this channel, the decline in inflation volatility should be reflected in a smaller inflation risk premium in nominal bond yields, which is exactly what is estimated in the Kim, Walsh, and Wei (2019) yield curve model (figure 4, "Term Premium Decomposition").	2,007	2	neutral
1,325	More fundamentally, however, the members believed that current growth in aggregate demand, should it persist, would continue to exceed the expansion of potential output and, by putting added pressure on already tight labor markets, would at some point foster inflationary imbalances that would undermine the economic expansion.	2,018	1	hawkish
1,326	At the same time, an acceleration in productivity also appears to have a direct disinflationary effect.	2,022	0	dovish
1,327	Setting the horizon on the interest rate caps to reinforce forward guidance on the policy rate would augment the credibility of the yield curve caps and thereby diminish concerns about an open-ended balance sheet commitment.	2,006	2	neutral
1,328	The civilian unemployment rate was 4.	2,020	2	neutral
1,329	Several participants raised concerns regarding the longer-run effects of the pandemic, including how it could lead to a restructuring in some sectors of the economy that could slow employment growth or could accelerate technological disruption that was likely limiting the pricing power of firms.	2,014	0	dovish
1,330	A few participants commented that both survey- and market-based measures of short-term inflation expectations were at historically high levels.	1,996	1	hawkish
1,331	First, longer-maturity obligations may be more attractive because of more stable inflation, better-anchored inflation expectations, and a reduction in economic volatility more generally.	2,001	0	dovish
1,332	After robust growth in the second quarter, M2 decelerated somewhat and M3 was about unchanged in July.	2,015	1	hawkish
1,333	also because such actions help to head off undesirable changes in inflation down the road.	2,020	2	neutral
1,334	In December 1996, before my time at the Board, John Campbell of Harvard and Robert Shiller of Yale made a presentation at the Fed, in which they used dividend-price ratios and related measures to argue that the stock market was overvalued.	2,020	2	neutral
1,335	To summarize these international data, one might say that something brought inflation down in the 1980s and 1990s,	2,007	2	neutral
1,336	Traditionally, these two measures of excess demand move together over the cycle.	1,997	2	neutral
1,337	Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.	2,001	0	dovish
1,338	also term premiums to compensate for the risk associated with commitments to extend credit so far in the future, including the risk of future inflation.	2,003	2	neutral
1,339	Industrial production had slipped in recent months and private payroll employment had changed little,	2,014	2	neutral
1,340	With today's action, the real federal funds rate--measured as the difference between the nominal funds rate and a moving average of core PCE inflation--would move slightly into positive territory.	2,003	1	hawkish
1,341	October 12, 2021 U.S. Economic Outlook and Monetary Policy Vice Chair Richard H. Clarida At the 2021 Institute of International Finance Annual Membership Meeting: Sustainable Economic Growth and Financial Stability in a Diverging, Decarbonizing, Digitizing, Indebted World, Washington, D.C. (via webcast) Share It is my pleasure to meet virtually with you today at the 2021 Institute of International Finance Annual Membership Meeting.1 I regret that we are not meeting in person, but I look forward, as always, to a conversation with my good friend and one-time colleague Tim Adams.	2,020	2	neutral
1,342	The resulting uncertainty makes it difficult to predict the future path of activity, unemployment, and inflation.	2,020	2	neutral
1,343	However, given the difficulty in distinguishing between changes in asset prices dominated by fundamental forces and those driven by non-fundamental forces, policymakers should not target asset prices or try to guide them to the policymakers' estimate of fundamental value.	2,005	2	neutral
1,344	The implication is that monetary policy is already well positioned to slow the expansion.	2,004	1	hawkish
1,345	During much of the recovery, forecasters have been overly optimistic about growth	2,017	1	hawkish
1,346	Industrial production picked up in response to the advance in final demand and a slowdown in the runoff of excess inventory stocks.	2,004	2	neutral
1,347	The Committee again anticipated that it likely would be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continued to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remained well anchored.	2,016	0	dovish

1,247

An important element in interpreting financial market prices is the identification of the risk premiums they contain.

2,004

2

neutral

1,248

That central bank independence promotes lower inflation in developed countries is well-established by the economic literature.

2,002

2

neutral

1,249

Members also agreed that there was only a remote possibility that the process of disinflation would cumulate to the point of a decline for an extended period in the general price level.

1,998

2

neutral

1,250

The Committee took these actions to provide a somewhat more accommodative policy in response to muted inflation pressures and the risks to the outlook I mentioned earlier.

2,005

0

dovish

1,251

Conclusion The United States productivity growth spurt, realized to a much lesser extent around the world, can be attributed largely to a combination of an investment boom and a technological revolution.

2,008

0

dovish

1,252

When, when you get to—in, in the forecast, all of that, you know, supply and demand sides of the economy adapt.

2,019

2

neutral

1,253

And you know, we haven’t yet—we just touched 2 percent core inflation, to pick one measure—just touched it for a few months, and then we’ve fallen back.

2,022

0

dovish

1,254

But in terms of just targeting growth, you know, I think—I actually think our dual mandate works very well, which is maximum employment and stable prices.

2,018

2

neutral

1,255

To be clear, when I say "risk premium" I mean the additional compensation required by investors for holding a risky security--that is, one with uncertain returns--above the compensation that would be demanded by risk-neutral investors who care only about expected returns.

2,022

2

neutral

1,256

The staff's outlook for inflation was broadly unchanged.

2,005

2

neutral

1,257

He was concerned that the flattening yield curve was partly due to falling longer-term inflation expectations or a lower neutral real rate of interest.

2,019

0

dovish

1,258

In any event, it was clear that forecasts in recent years typically had overstated the rise in inflation, and a great deal of uncertainty surrounded the extent to which productivity gains and other factors, some unspecified, might continue to hold down inflation in a period of robust economic growth and relatively tight labor markets.

2,011

2

neutral

1,259

A couple of participants pointed to the decline in credit spreads to relatively low levels by historical standards; one of these participants noted the risk of either a sharp rise in spreads, which could have negative repercussions for aggregate demand, or a continuation of the decline in spreads, which could undermine financial stability over time.

2,011

0

dovish

1,260

In particular, the Committee noted that it would respond as necessary to maintain price stability.

2,021

1

hawkish

1,261

Rather than rely on Fed watchers employed by primary dealers to read the tea leaves of our daily interventions, we inform everyone, openly, and take responsibility for the level of short-term interest rates.

2,005

2

neutral

1,262

In such an environment, a central bank mandated to pursue price stability can be flexible according to the circumstances, while one with a numerical target may need to obtain formal modification of its objectives.

2,021

2

neutral

1,263

This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. "

2,015

2

neutral

1,264

And what we—it looks like we’re seeing a slowdown in the rate of growth.

2,022

0

dovish

1,265

Nonetheless, all but one of the members believed that in light of the uncertainties about the economic outlook, an immediate policy tightening was not needed in the absence of firmer indications that inflationary pressures might be emerging.

2,014

1

hawkish

1,266

A couple of participants indicated that they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation.

2,011

2

neutral

1,267

Monetary Policy Spillovers Flow in Both Directions There is a vast literature that documents the existence of international spillovers from U.S. monetary policy, especially to emerging markets (EMs).

2,021

2

neutral

1,268

Later in the period, AFE yields partially rebounded and foreign equity prices fully recovered on some easing of U. S. –China trade tensions, as well as perceptions of reduced political uncertainty in the United Kingdom and Italy.

2,022

2

neutral

1,269

The staff also reduced slightly its forecast of growth next year

2,000

0

dovish

1,270

The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen.

2,013

0

dovish

1,271

Inflation readings available since the April meeting continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and continued decreases in prices of non-energy imports.

2,016

0

dovish

1,272

the very shortest maturities, and with the additional tightening and deceleration in inflation that is expected over coming quarters, the entire real curve will soon move into positive territory.

2,000

1

hawkish

1,273

Some may see a monetary policy that actively addresses episodes of financial instability along the lines that I have just described as promoting excessive risk-taking and thus increasing the probability of future crises.

2,017

1

hawkish

1,274

You know, it says that we will seek to—seek inflation that runs moderately above 2 percent for some time.

2,019

0

dovish

1,275

In some models, these factors can be explicitly tied to observable economic variables, such as inflation; in other models, the factors represent statistical summaries of the data and have no explicit economic interpretations.

2,021

2

neutral

1,276

Similarly, I don't think we yet fully understand the role of Year 2000 preparations in either the late 1990s investment boom or the acceleration in productivity.

2,020

2

neutral

1,277

That apparently has not made its way into prices yet,

2,005

2

neutral

1,278

As always, our actions are guided by our congressional mandate to promote maximum employment and price stability.

2,018

1

hawkish

1,279

But, I would say, overall, we’re trying to sustain the expansion and keep, you know, close to our statutory goals, which are maximum employment and stable prices.

2,014

1

hawkish

1,280

Although some decline in inflation could not be ruled out, persistence of the current degree of tightness in labor markets, consistent with the economy growing at a pace near its potential, could at some point begin to put more pressure on costs and prices, and growth somewhat above potential, which some members saw as a distinct possibility, would be even more likely to produce that result.

2,015

1

hawkish

1,281

There should be able to be an adjustment that would have lower than—perhaps lower-than-expected increases in unemployment—lower than would be expected in the ordinary course of events because the level—the ratio of, of vacancies to unemployed is just out of keeping with historical experience.

2,015

2

neutral

1,282

In a virtuous circle, stable inflation expectations help the central bank to keep inflation low even as it retains substantial freedom to respond to disturbances to the broader economy.

2,021

1

hawkish

1,283

For example, the Stock-Watson indicator and other indicators based on interest rates and spreads signaled the 1990-91 recession very weakly and rather late.

1,997

2

neutral

1,284

Subsequent to monetary union, harmonized consumer prices can be used as the best available measure of inflation in the Euro area.

2,004

2

neutral

1,285

Overall consumer prices increased in July and August at about the second-quarter rate.

2,012

1

hawkish

1,286

Economic data releases were mixed, on balance, over the intermeeting period, but market participants were especially attentive to incoming information on the labor market--most notably, the private payroll figures in the employment report for May, which were considerably weaker than investors expected.

2,016

0

dovish

1,287

Longer-term inflation expectations have remained stable.

2,019

2

neutral

1,288

I will then discuss the prospects for adjusting monetary policy in the manner needed to sustain a strong job market

2,001

1

hawkish

1,289

Nonetheless, on balance, most members currently considered the upside risks to inflation to be a bit less pressing than those on the downside for the next few quarters.

2,019

0

dovish

1,290

One prominent example is with semiconductor producers and their need to dramatically alter the mix of production to meet demands of the high-tech and automotive industries.

2,001

2

neutral

1,291

I look forward, as always, to my conversation with Tim, but first, please allow me to offer a few remarks on the economic outlook, Federal Reserve monetary policy, and our new monetary policy framework.

2,022

2

neutral

1,292

Participants expected that, with further gradual increases in the federal funds rate, economic activity would expand at a solid rate during the remainder of this year and a moderate pace in the medium term, and that labor market conditions would remain strong.

2,008

1

hawkish

1,293

Others indicated that because part of the recent decline in the jobless rate was associated with a reduction in labor force participation, the drop in the unemployment rate likely overstated the overall improvement in the labor market.

2,019

0

dovish

1,294

One prominent example is the work in behavioral finance on how alternative assumptions regarding rationality can affect predictions for asset prices and saving behavior

2,001

2

neutral

1,295

As far as—as the policy rate, what we’ve said is that we will maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals.

2,017

2

neutral

1,296

Inflation-targeting regimes make sense only if the central bank has independent control of the instruments of monetary policy, as holding the central bank responsible for meeting its inflation target is hardly possible otherwise.

1,998

2

neutral

1,297

The run-up in mortgage rates since the latter part of June was expected to curb housing demand to a limited extent in coming months,

1,997

2

neutral

1,299

Survey measures give us an idea of what the average household expects inflation to be in the coming years.

2,005

2

neutral

1,300

The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability. "

2,009

1

hawkish

1,301

Moreover, substantial gains in productivity were muting the effects of rising labor compensation on unit costs, and vigorous competition in numerous markets was continuing to make it very difficult or impossible for business firms to raise their prices to cover rising costs or enhance profit margins.

2,011

1

hawkish

1,302

Broad equity price indexes decreased slightly, on net, as substantial early gains arising from investors' improved perceptions about the inflation outlook and better-than-feared second-quarter earnings were more than offset by later losses arising from expectations that the Committee would follow a more restrictive policy than previously expected.

2,011

1

hawkish

1,303

Another reason for the reliance on judgment in the forecasting process is the practical requirement that the forecast for inflation be consistent with the staff's overall view of the economy, including the forecasts for key economic variables such as wages, interest rates, and consumption spending.

2,022

2

neutral

1,304

Job gains had been solid, on average, in recent months, and the unemployment rate had remained low.

2,005

1

hawkish

1,305

Members noted that they expected to maintain this target range until they were confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals.

1,997

2

neutral

1,306

The unemployment rate declined in May and , 2020 June but, at 11.1 percent, remains far above its level before the outbreak and greater than the Chair Powell’s Press Conference FINAL peak during the Global Financial Crisis.

2,012

0

dovish

1,307

Employment continued to expand unevenly,

2,005

2

neutral

1,308

sustained outsized gains in productivity could further damp hiring.

2,003

0

dovish

1,309

In the residential real estate sector, home sales and construction had increased from very low levels, and house prices appeared to be stabilizing.

2,009

2

neutral

1,310

In fact, it’s already—it’s already understood, I think, that—that there’s more—even though we’re at 3½ percent unemployment, there’s actually more slack out there, in a sense.

2,022

0

dovish

1,311

What monetary policy affects, primarily, is the state of the business cycle, the amount of excess unemployment or the extent of recession in the economy.

2,017

2

neutral

1,312

However, with the contraction in housing activity expected to abate this year, the pace of economic growth was anticipated to edge back up to a level that was close to the staff's estimate of potential output growth by the end of 2007 and to remain in that same range throughout 2008.

2,008

2

neutral

1,313

We take the level of the stock market into account when we consider the economic outlook and monetary policy.

2,003

2

neutral

1,314

Factors pointing to potentially higher inflation included increased pressures on food prices stemming from disappointing harvests in some areas and relatively low grain supplies.

2,014

1

hawkish

1,315

In contrast, under a price-level-targeting scheme, continuing deflation combined with an upward-sloping path for the price-level target causes the size of the price-level gap to increase over time.

2,022

0

dovish

1,316

For 1998, the Committee agreed on a tentative basis to set the same ranges as in 1997 for growth of the monetary aggregates and debt, measured from the fourth quarter of 1997 to the fourth quarter of 1998.

2,002

2

neutral

1,317

An anticipated sharp slowdown in the pace of inventory accumulation also would damp domestic production as the growth of stocks was brought into balance with the expected more moderate trajectory of final sales.

2,017

2

neutral

1,318

Policy tightening started last year, as emerging markets including Mexico and Brazil increased rates substantially amid expectations of accelerating inflation.

2,002

1

hawkish

1,319

Indeed, most anticipated that inflation will slow for a time to rates somewhat lower than those they judge consistent with the dual goals of price stability and maximum employment, initially reflecting the recent declines in the prices of energy and other commodities and later responding to several years of substantial economic slack.

2,022

0

dovish

1,320

In addition, the May 1, 2019 trimmed mean measures of inflation did not go down as much.

2,022

1

hawkish

1,321

Maintaining low inflation rates reduces the levels of future uncertainties and, hence, increases the scope of investment opportunities.

2,021

1

hawkish

1,322

For example, Kozicki and Tinsley (2001) show that it is far easier to make sense of the term structure of Treasury yields if one assumes that expectations about long-run inflation adjust in a reasonable adaptive manner.

2,004

2

neutral

1,323

We have not focused on whether we meet the liftoff test, because we don’t meet the liftoff test now because we’re not at maximum employment.

2,020

0

dovish

1,324

Through this channel, the decline in inflation volatility should be reflected in a smaller inflation risk premium in nominal bond yields, which is exactly what is estimated in the Kim, Walsh, and Wei (2019) yield curve model (figure 4, "Term Premium Decomposition").

2,007

2

neutral

1,325

More fundamentally, however, the members believed that current growth in aggregate demand, should it persist, would continue to exceed the expansion of potential output and, by putting added pressure on already tight labor markets, would at some point foster inflationary imbalances that would undermine the economic expansion.

2,018

1

hawkish

1,326

At the same time, an acceleration in productivity also appears to have a direct disinflationary effect.

2,022

0

dovish

1,327

Setting the horizon on the interest rate caps to reinforce forward guidance on the policy rate would augment the credibility of the yield curve caps and thereby diminish concerns about an open-ended balance sheet commitment.

2,006

2

neutral

1,328

The civilian unemployment rate was 4.

2,020

2

neutral

1,329

Several participants raised concerns regarding the longer-run effects of the pandemic, including how it could lead to a restructuring in some sectors of the economy that could slow employment growth or could accelerate technological disruption that was likely limiting the pricing power of firms.

2,014

0

dovish

1,330

A few participants commented that both survey- and market-based measures of short-term inflation expectations were at historically high levels.

1,996

1

hawkish

1,331

First, longer-maturity obligations may be more attractive because of more stable inflation, better-anchored inflation expectations, and a reduction in economic volatility more generally.

2,001

0

dovish

1,332

After robust growth in the second quarter, M2 decelerated somewhat and M3 was about unchanged in July.

2,015

1

hawkish

1,333

also because such actions help to head off undesirable changes in inflation down the road.

2,020

2

neutral

1,334

In December 1996, before my time at the Board, John Campbell of Harvard and Robert Shiller of Yale made a presentation at the Fed, in which they used dividend-price ratios and related measures to argue that the stock market was overvalued.

2,020

2

neutral

1,335

To summarize these international data, one might say that something brought inflation down in the 1980s and 1990s,

2,007

2

neutral

1,336

Traditionally, these two measures of excess demand move together over the cycle.

1,997

2

neutral

1,337

Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.

2,001

0

dovish

1,338

also term premiums to compensate for the risk associated with commitments to extend credit so far in the future, including the risk of future inflation.

2,003

2

neutral

1,339

Industrial production had slipped in recent months and private payroll employment had changed little,

2,014

2

neutral

1,340

With today's action, the real federal funds rate--measured as the difference between the nominal funds rate and a moving average of core PCE inflation--would move slightly into positive territory.

2,003

1

hawkish

1,341

October 12, 2021 U.S. Economic Outlook and Monetary Policy Vice Chair Richard H. Clarida At the 2021 Institute of International Finance Annual Membership Meeting: Sustainable Economic Growth and Financial Stability in a Diverging, Decarbonizing, Digitizing, Indebted World, Washington, D.C. (via webcast) Share It is my pleasure to meet virtually with you today at the 2021 Institute of International Finance Annual Membership Meeting.1 I regret that we are not meeting in person, but I look forward, as always, to a conversation with my good friend and one-time colleague Tim Adams.

2,020

2

neutral

1,342

The resulting uncertainty makes it difficult to predict the future path of activity, unemployment, and inflation.

2,020

2

neutral

1,343

However, given the difficulty in distinguishing between changes in asset prices dominated by fundamental forces and those driven by non-fundamental forces, policymakers should not target asset prices or try to guide them to the policymakers' estimate of fundamental value.

2,005

2

neutral

1,344

The implication is that monetary policy is already well positioned to slow the expansion.

2,004

1

hawkish

1,345

During much of the recovery, forecasters have been overly optimistic about growth

2,017

1

hawkish

1,346

Industrial production picked up in response to the advance in final demand and a slowdown in the runoff of excess inventory stocks.

2,004

2

neutral

1,347

The Committee again anticipated that it likely would be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continued to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remained well anchored.

2,016

0

dovish