TextCEsInFinance/fomc-communication

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1,653	Looking to the future, however, the members generally agreed that the risks were in the direction of a heightening in inflation pressures despite their belief that growth in overall demand now seemed to have declined to a more sustainable pace and probably would continue to expand for a time at a rate below that of the economy's output potential.	2,004	1	hawkish
1,654	The slowing economy, together with rising interest rates, was in turn a major factor in precipitating the stock market crash.	2,001	2	neutral
1,655	At the time, we could only observe outcomes that did not fit with preconceptions; try to find rationales that explained what we were seeing; and in the process, derive implications about the future that could be used to guide a forward-looking monetary policy.	2,022	2	neutral
1,656	But, really, it isn’t monetary policy.	2,022	2	neutral
1,657	The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.	2,001	0	dovish
1,658	Household spending stepped up in mid-April, coinciding with the first disbursement of stimulus payments to households and a ramp-up in the payout of unemployment benefits, and showed the most pronounced increases in the states that received more benefits.9 With some of the fiscal support measures either provided as one-off payments or slated to come to an end in July, the strength of the recovery will depend importantly on the timing, magnitude, and distribution of additional fiscal support.	2,007	0	dovish
1,659	Apart from notably adverse business sentiment and disappointing growth in sales and profits, factors that were curbing capital expenditures cited by members included persisting capital overhangs stemming from what were now seen as excessive earlier buildups in equipment and software and substantial idle capacity in many industrial and commercial structures.	2,015	0	dovish
1,660	Although we are hearing some reports of large retailers planning markdowns due to excess inventories, we do not have hard data at an aggregate level suggesting that businesses are reducing margins in response to more price sensitivity among customers.	1,997	2	neutral
1,661	If you look at core PCE inflation, which is a good measure of where inflation is running now, if you look at it on a 3-, 6-, and 12-month trailing annualized basis, you’ll see that inflation is at 4.8 percent, 4.5 percent, and 4.8 percent.	2,021	1	hawkish
1,662	The latter could well be augmented by sharply rising medical costs and by attempts to protect the purchasing power of wages from the erosion caused by the rise in energy prices.	2,010	1	hawkish
1,663	It is important to note, however, that although sound policy undoubtedly helped create the conditions for growth, macroeconomic policy cannot create growth itself.	1,999	2	neutral
1,664	These downside risks were seen as essentially counterbalanced by the upside risk that inflation could increase more than expected in an economy that was projected to move further above its longer-run potential.	2,020	1	hawkish
1,665	This modal projection for the path of the unemployment rate is, according to the Atlanta Fed jobs calculator, consistent with a rebound in labor force participation to its estimated demographic trend and is also consistent with cumulative employment gains this year and next that, by the end of 2022, eliminate the 7 million "employment gap" relative to the previous cycle peak I mentioned earlier.5 As is the case for GDP growth and the unemployment rate, my projections for headline and core PCE (personal consumption expenditures) inflation are also similar to the paths of the SEP median of modal projections for these variables.	2,006	2	neutral
1,666	Mr. Broaddus dissented because he continued to believe that a modest tightening of policy would be prudent in light of the apparent persisting strength in aggregate demand for goods and services.	2,005	1	hawkish
1,667	As is evident in the right-hand chart, the relationship between the growth differential and capital inflows to EMEs seems to be quite strong.	2,022	2	neutral
1,668	Last year was the fifth consecutive year that inflation, measured by the chain GDP price index, was 2.6% or lower and the 5-year compound annual inflation rate is now 2.5%, the lowest since 1967.	1,998	0	dovish
1,669	The staff continued to view the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as generally similar to the average of the past 20 years.	1,998	2	neutral
1,670	The challenge is to set a strategy that respects this uncertainty, takes advantages of opportunities for better performance, while mitigating the risks of overtaxing the limits of sustainable production and growth.	2,005	2	neutral
1,671	Some saw a risk that inflationary pressures might develop more rapidly than currently anticipated as resource utilization tightened,	2,017	1	hawkish
1,672	The Committee directs the Desk to purchase agency debt, agency MBS, and longer-term Treasury securities during the intermeeting period with the aim of providing support to private credit markets and economic activity.	2,001	0	dovish
1,673	The weakness in commodity prices and the appreciation of the dollar also continued to weigh on activity in the energy and agricultural sectors.	2,001	0	dovish
1,674	The threat to global economic growth and financial stability posed by the fiscal situation in some European nations sparked widespread flight-to-quality flows over most of the intermeeting period.	2,005	2	neutral
1,675	September 01, 2020 Bringing the Statement on Longer-Run Goals and Monetary Policy Strategy into Alignment with Longer-Run Changes in the Economy Governor Lael Brainard At "How the Fed Will Respond to the COVID-19 Recession in an Era of Low Rates and Low Inflation," an event hosted by the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, Washington, D.C. (via webcast) Share Watch Live I want to thank David Wessel for hosting this event.	2,006	2	neutral
1,676	Some members expressed a concern that in this context any further adverse shocks could have disproportionate effects, resulting in a significant slowing in growth going forward.	2,013	0	dovish
1,677	Looking ahead, the anticipated pickup in employment and related gains in incomes, undergirded by continued robust growth in structural productivity, was seen as supporting further expansion in consumer spending.	2,004	1	hawkish
1,678	Participants' Views and Committee Policy ActionIn conjunction with this FOMC meeting, all meeting participants--the five members of the Board of Governors and the presidents of the 12 Federal Reserve Banks--provided projections for economic growth, the unemployment rate, and consumer price inflation for each year from 2009 through 2011 and over a longer horizon.	1,997	2	neutral
1,679	Because an interest rate, by definition, is the exchange rate for money against non-monies, money obviously is central to monetary policy.	2,007	2	neutral
1,680	And so you’re seeing prices are moving back up off their lows there.	2,020	1	hawkish
1,681	European equity prices were also lower over the period.	2,005	2	neutral
1,682	If this policy succeeds ex post, inflation expectations become anchored at the new lower level of inflation, and policy can, then, respond to demand shocks by adjusting real rates pro-cyclically, the opposite of what is required when initial inflation is too high and inflation expectations are not anchored.13 Inflation will also be pro-cyclical with well-anchored inflation expectations if demand shocks dominate and inflation expectations remain anchored.	2,019	2	neutral
1,683	However, if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated.	2,007	1	hawkish
1,684	I will focus my remarks today on the use of explicit forward guidance as a tool for monetary policy.1 Before I start, let me briefly discuss near-term monetary policy.	2,001	2	neutral
1,685	Participants judged that it would be appropriate to move the stance of monetary policy toward a neutral posture expeditiously.	2,011	2	neutral
1,686	That said, our model accords the greatest roles to increased productivity growth, which has made the United States a magnet for foreign saving, and to the slump in foreign domestic demand, which has led to an excess of saving in those economies.	2,007	0	dovish
1,687	But, again underscoring an earlier point, this tightness of the labor market has not manifested itself in ongoing escalation of wage inflation.	2,004	1	hawkish
1,688	In keeping with its usual procedures under the Humphrey-Hawkins Act, the Committee would review its ranges at midyear, or sooner if interim conditions warranted, in light of the growth and velocity behavior of the aggregates and ongoing economic and financial developments.	1,999	2	neutral
1,689	You might ask: Does successful monetary policymaking really require all this additional knowledge?	1,999	2	neutral
1,690	In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.	2,001	2	neutral
1,691	Inflation in 1996, measured by the chain price index for GDP or the core CPI, was the lowest in 30 years.	2,005	0	dovish
1,692	Reports from several Districts suggested that firms had greater scope than in the recent past to raise prices in response to strong demand or increases in input costs, including those associated with tariff increases and recent rises in fuel and freight expenses.	2,012	1	hawkish
1,693	The median expectation for inflation over the next 5 to 10 years from the Michigan survey edged down in October to a new historical low,	2,010	0	dovish
1,694	It is generally thought that monetary policy takes many months to have most of its effect on the growth of output and employment, while, of course, it has an immediate impact on financial markets.	2,020	2	neutral
1,695	The members concluded that retaining a risk statement weighted toward more inflation pressures would best represent their current thinking, but they believed it was desirable to provide some recognition of the emergence of increased downside risks to the economic expansion in the statement to be released after this meeting.	2,006	1	hawkish
1,696	They also generally expected that further gradual increases in the target range for the federal funds rate would be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.	2,017	1	hawkish
1,697	Pressures on resources would rise as the anticipated upturn and possible above-trend growth brought the economy closer to full capacity utilization.	1,996	1	hawkish
1,698	The Federal Reserve Bank of New York was authorized and directed, until instructed otherwise by the Committee, to execute transactions in the System Account in accordance with the following domestic policy directive: The information reviewed at this meeting suggests that the expansion in economic activity has slowed considerably after a very rapid advance in the first quarter.	2,002	0	dovish
1,699	If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability.	2,015	0	dovish
1,700	Between the end of July and the FOMC's September meeting, we will get two employment and CPI reports with data for July and August.	2,000	2	neutral
1,701	Both total and core inflation were projected to move up slightly next year, as the low readings early this year were expected to be transitory, but nevertheless to continue to run below 2 percent.	2,011	0	dovish
1,702	But, certainly, we’ve had a lot of years in which interest rates have been low.	2,022	2	neutral
1,703	While participants viewed the downside risks to their forecasts of economic activity over the projection period as having diminished, their assessment of the most likely outcomes for economic activity and inflation over the projection period was not greatly changed.	2,004	2	neutral
1,704	Major stock price indexes were up a bit over the intermeeting period, as positive first-quarter earnings reports more than offset the negative effects of higher energy prices and rising interest rates.	2,017	1	hawkish
1,705	However, other participants noted that the continued subdued trend in wages was evidence of an absence of upward pressure on inflation from the current level of resource utilization.	2,006	0	dovish
1,706	Implications of Economic Theory I am going to assert some conclusions based on economic theory that help to understand the potential for monetary policy to achieve these objectives and the consistency among them.	2,022	2	neutral
1,707	the new statement maintains our definition that the longer-run goal for inflation is 2 percent, it elevates the importanceâ€”and the challengeâ€”of keeping inflation expectations well anchored at 2 percent in a world in which an effective-lower-bound constraint is, in downturns, binding on the federal funds rate.	2,000	2	neutral
1,708	Prominent among these risks were a possible intensification of strains in the euro zone, with potential spillovers to U. S. financial markets and institutions and thus to the broader U. S. economy; a larger-than-expected U. S. fiscal tightening; and the possibility of a further slowdown in global economic growth.	2,005	0	dovish
1,709	But speculators rarely succeed in dislodging an exchange rate that is firmly rooted in compatible policies and cost structures.	1,997	2	neutral
1,710	In their discussion of considerations related to asset purchases, various participants noted that these purchases were an important part of the monetary policy toolkit and a critical aspect of the Federal Reserve's response to the economic effects of the pandemic, supporting smooth financial market functioning and accommodative financial conditions, which aided the flow of credit to households and businesses and supported the recovery.	2,021	0	dovish
1,711	From the end of 2000 to the end of 2003, productivity rose at a 3-1/2 percent annual rate and, even after recent downward revisions to the data, it is estimated to have increased at an average annual rate of 2-1/4 percent since the end of 2003.	2,021	2	neutral
1,712	Several participants noted the increase in agricultural crop prices over 2020 and the associated improvement in farm revenues.	2,017	2	neutral
1,713	While a preemptive tightening move might be warranted in the not-too-distant future to help contain inflationary pressures in the economy, these members believed that a symmetrical directive would best convey the message that no tightening action was contemplated for the weeks immediately ahead.	2,017	1	hawkish
1,714	Recent increases in house prices and equity prices were positives,	2,007	2	neutral
1,715	May 26, 2021 The Economic Outlook and Monetary Policy Vice Chair for Supervision Randal K. Quarles At the Hutchins Center on Fiscal and Monetary Policy, The Brookings Institution, Washington, D.C. (via webcast) Share Watch Live Thank you, David, and thank you to Brookings and the Hutchins Center for the opportunity to lead things off and be part of this very distinguished panel.	2,017	2	neutral
1,716	Beyond 2017, the forecast for real GDP growth was little revised.	2,018	2	neutral
1,717	Their key finding, illustrated in figure 3, is that Federal Reserve policy rate surprises attributed to stronger U.S. growth generally have only moderate spillovers to EM financial conditions, whereas U.S. policy rate changes attributed to U.S. inflationary pressures trigger more substantial spillovers to EM financial conditions.	1,999	2	neutral
1,718	Members agreed that the Federal Reserve was committed to using its full range of tools to support the U. S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals.	2,003	0	dovish
1,720	Potentially, waiting could require more disruptive policy tightening actions later and could risk the credibility of the System's anti-inflation policy.	2,001	1	hawkish
1,721	In particular, the unemployment rates in the metropolitan areas of South Dakota have consistently been lower than in rural areas, and this relative abundance of job opportunities has tended to encourage migration to areas such as Sioux Falls.	2,021	2	neutral
1,722	Therefore, even in the case of personal computers, where we have made such great strides in measuring quality changes, I suspect that important phenomena still may not be adequately captured by our published price indexes.	2,008	2	neutral
1,723	What implications do these results have for our broader understanding and for the practice of monetary policy?	2,022	2	neutral
1,724	In contrast, in cases in which variations in the demand for reserves or in external factors affecting reserve supply appear likely to be temporary, the Desk typically prefers to conduct open-market operations through short-term or long-term repurchase agreements, known as repos.	2,007	2	neutral
1,725	A few participants expressed less confidence in this outlook for inflation and commented that inflation had averaged less than 2 percent over the past several years even as resource utilization had increased, or pointed to downward pressures from global or technology-related factors that could continue to suppress inflation.	2,020	0	dovish
1,726	Financial markets are the channel through which our policy affects the economy, and asset prices contain valuable information about investors' expectations for the course of policy, economic activity, and inflation, as well as about the risks around those expectations.	2,005	2	neutral
1,728	In general, participants viewed recent consumer price developments as consistent with their expectation that inflation was on a trajectory to achieve the Committee's symmetric 2 percent objective on a sustained basis.	1,999	2	neutral
1,729	Many potential inflation targeters ask, "Why not zero?"	1,999	2	neutral
1,730	So, you know, I can’t—all I can tell you is, we’ll be looking at weak global growth.	2,014	0	dovish
1,731	An environment involving such interest rates could have adverse repercussions on the functioning of some sectors of the money market, but the members agreed that the potential extent of such disruptions would not be sufficient to prevent the Committee from taking advantage of the full scope of conventional easing of the federal funds rate, should that become necessary.	2,002	0	dovish
1,732	The result could be cross-border spillovers from the increase in U.S. domestic demand, reducing the effect on U.S. real activity and inflation and potentially contributing to external imbalances.	2,020	2	neutral
1,733	The central tendency of the unemployment rate projections is slightly lower than in the March projections and now stands at 6.0 to 6.1 percent at the end of this year.	2,012	0	dovish
1,734	While more moderate growth in consumer spending for durable goods seemed likely after an extended period of robust expansion, these favorable factors suggested that the risks of a different outcome were tilted in the direction of faster-than-projected expansion.	2,002	1	hawkish
1,735	And in so far as that will affect monetary policy, of course we will have to factor those policies along with many other things, including the global environment and oil prices and other matters.	2,013	2	neutral
1,736	However, the deficit was up appreciably from its average for the first quarter, with the value of imports increasing substantially more than the value of exports.	1,998	1	hawkish
1,737	This is the scenario from which we draw the lesson that timely, typically preemptive, policy restraint to avoid the excesses of a boom results in longer expansions and avoids unnecessary fluctuations in both output and inflation.	2,020	1	hawkish
1,738	Advances in productivity had boosted profit margins, and high margins were helpful in that they could absorb some portion of any cost increases for a time.	2,015	2	neutral
1,739	Over the medium term, participants expected strong growth in employment, driven by continued progress on vaccinations and an associated rebound of economic activity and of consumer and business confidence, as well as accommodative fiscal and monetary policy.	2,012	0	dovish
1,740	That's why I said that flexibility is also an important characteristic of monetary policy during a time of financial turmoil.	2,005	0	dovish
1,741	Three Asset-Price-Bust Episodes Let us first examine the U.K. recession of 1974.	2,007	2	neutral
1,742	Our goal of price stability was achieved by most analysts' definition by mid-2003.	2,002	0	dovish
1,743	So I, you know, I’m—I feel quite comfortable that we can—in particular, that we can raise interest rates at the appropriate time, even if the balance sheet remains large for an extended period.	2,020	1	hawkish
1,744	The changes to the policy statement that we made over the past few FOMC meetings bring our policy guidance in line with the new framework outlined in the revised Statement on Longer-Run Goals and Monetary Policy Strategy that the Committee approved last August.4 In our new framework, we acknowledge that policy decisions going forward will be based on the FOMC's estimates of "shortfalls [emphasis added] of employment from its maximum level"â€”not "deviations."	2,005	0	dovish
1,745	These participants stated that, in such circumstances, a major challenge facing policymakers—especially in the presence of the effective lower bound on the federal funds rate—was to maintain a policy stance sufficiently accommodative to keep average inflation at 2 percent and thereby bolster the credibility of the Committee's new policy framework, facilitating the achievement of both maximum employment and price stability.	2,007	0	dovish
1,746	It will include all data relevant to our dual mandate of stable prices and maximum employment.	2,020	2	neutral
1,747	M2 growth picked up appreciably during December and January, evidently reflecting extra demands for liquidity and safety during the century-date-change period.	2,008	0	dovish
1,748	The unwinding in the early months of 1997 of special factors that had boosted net exports in the fourth quarter of 1996 was offsetting some of the effects on production of the persisting strength in domestic demand.	2,012	2	neutral
1,749	More recently, with inflation under control, overheating has shown up in the form of financial excess.	2,002	1	hawkish
1,751	Japan enjoyed effective price stability through most of the 1980s.	2,004	2	neutral
1,752	That is a positive for growth.	2,016	2	neutral
1,753	The vote encompassed approval of the statement below to be released at 2:00 p. m. : "Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions.	2,001	2	neutral
1,754	The guidance indicates an expectation that it will be appropriate to maintain the current target range of the federal funds rate until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.	1,997	2	neutral
1,755	still outpace that of potential over this period, leading to a decline in the unemployment rate to historically low levels, as monetary policy was assumed to remain highly accommodative.	2,008	0	dovish

1,653

Looking to the future, however, the members generally agreed that the risks were in the direction of a heightening in inflation pressures despite their belief that growth in overall demand now seemed to have declined to a more sustainable pace and probably would continue to expand for a time at a rate below that of the economy's output potential.

2,004

1

hawkish

1,654

The slowing economy, together with rising interest rates, was in turn a major factor in precipitating the stock market crash.

2,001

2

neutral

1,655

At the time, we could only observe outcomes that did not fit with preconceptions; try to find rationales that explained what we were seeing; and in the process, derive implications about the future that could be used to guide a forward-looking monetary policy.

2,022

2

neutral

1,656

But, really, it isn’t monetary policy.

2,022

2

neutral

1,657

The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.

2,001

0

dovish

1,658

Household spending stepped up in mid-April, coinciding with the first disbursement of stimulus payments to households and a ramp-up in the payout of unemployment benefits, and showed the most pronounced increases in the states that received more benefits.9 With some of the fiscal support measures either provided as one-off payments or slated to come to an end in July, the strength of the recovery will depend importantly on the timing, magnitude, and distribution of additional fiscal support.

2,007

0

dovish

1,659

Apart from notably adverse business sentiment and disappointing growth in sales and profits, factors that were curbing capital expenditures cited by members included persisting capital overhangs stemming from what were now seen as excessive earlier buildups in equipment and software and substantial idle capacity in many industrial and commercial structures.

2,015

0

dovish

1,660

Although we are hearing some reports of large retailers planning markdowns due to excess inventories, we do not have hard data at an aggregate level suggesting that businesses are reducing margins in response to more price sensitivity among customers.

1,997

2

neutral

1,661

If you look at core PCE inflation, which is a good measure of where inflation is running now, if you look at it on a 3-, 6-, and 12-month trailing annualized basis, you’ll see that inflation is at 4.8 percent, 4.5 percent, and 4.8 percent.

2,021

1

hawkish

1,662

The latter could well be augmented by sharply rising medical costs and by attempts to protect the purchasing power of wages from the erosion caused by the rise in energy prices.

2,010

1

hawkish

1,663

It is important to note, however, that although sound policy undoubtedly helped create the conditions for growth, macroeconomic policy cannot create growth itself.

1,999

2

neutral

1,664

These downside risks were seen as essentially counterbalanced by the upside risk that inflation could increase more than expected in an economy that was projected to move further above its longer-run potential.

2,020

1

hawkish

1,665

This modal projection for the path of the unemployment rate is, according to the Atlanta Fed jobs calculator, consistent with a rebound in labor force participation to its estimated demographic trend and is also consistent with cumulative employment gains this year and next that, by the end of 2022, eliminate the 7 million "employment gap" relative to the previous cycle peak I mentioned earlier.5 As is the case for GDP growth and the unemployment rate, my projections for headline and core PCE (personal consumption expenditures) inflation are also similar to the paths of the SEP median of modal projections for these variables.

2,006

2

neutral

1,666

Mr. Broaddus dissented because he continued to believe that a modest tightening of policy would be prudent in light of the apparent persisting strength in aggregate demand for goods and services.

2,005

1

hawkish

1,667

As is evident in the right-hand chart, the relationship between the growth differential and capital inflows to EMEs seems to be quite strong.

2,022

2

neutral

1,668

Last year was the fifth consecutive year that inflation, measured by the chain GDP price index, was 2.6% or lower and the 5-year compound annual inflation rate is now 2.5%, the lowest since 1967.

1,998

0

dovish

1,669

The staff continued to view the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as generally similar to the average of the past 20 years.

1,998

2

neutral

1,670

The challenge is to set a strategy that respects this uncertainty, takes advantages of opportunities for better performance, while mitigating the risks of overtaxing the limits of sustainable production and growth.

2,005

2

neutral

1,671

Some saw a risk that inflationary pressures might develop more rapidly than currently anticipated as resource utilization tightened,

2,017

1

hawkish

1,672

The Committee directs the Desk to purchase agency debt, agency MBS, and longer-term Treasury securities during the intermeeting period with the aim of providing support to private credit markets and economic activity.

2,001

0

dovish

1,673

The weakness in commodity prices and the appreciation of the dollar also continued to weigh on activity in the energy and agricultural sectors.

2,001

0

dovish

1,674

The threat to global economic growth and financial stability posed by the fiscal situation in some European nations sparked widespread flight-to-quality flows over most of the intermeeting period.

2,005

2

neutral

1,675

September 01, 2020 Bringing the Statement on Longer-Run Goals and Monetary Policy Strategy into Alignment with Longer-Run Changes in the Economy Governor Lael Brainard At "How the Fed Will Respond to the COVID-19 Recession in an Era of Low Rates and Low Inflation," an event hosted by the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, Washington, D.C. (via webcast) Share Watch Live I want to thank David Wessel for hosting this event.

2,006

2

neutral

1,676

Some members expressed a concern that in this context any further adverse shocks could have disproportionate effects, resulting in a significant slowing in growth going forward.

2,013

0

dovish

1,677

Looking ahead, the anticipated pickup in employment and related gains in incomes, undergirded by continued robust growth in structural productivity, was seen as supporting further expansion in consumer spending.

2,004

1

hawkish

1,678

Participants' Views and Committee Policy ActionIn conjunction with this FOMC meeting, all meeting participants--the five members of the Board of Governors and the presidents of the 12 Federal Reserve Banks--provided projections for economic growth, the unemployment rate, and consumer price inflation for each year from 2009 through 2011 and over a longer horizon.

1,997

2

neutral

1,679

Because an interest rate, by definition, is the exchange rate for money against non-monies, money obviously is central to monetary policy.

2,007

2

neutral

1,680

And so you’re seeing prices are moving back up off their lows there.

2,020

1

hawkish

1,681

European equity prices were also lower over the period.

2,005

2

neutral

1,682

If this policy succeeds ex post, inflation expectations become anchored at the new lower level of inflation, and policy can, then, respond to demand shocks by adjusting real rates pro-cyclically, the opposite of what is required when initial inflation is too high and inflation expectations are not anchored.13 Inflation will also be pro-cyclical with well-anchored inflation expectations if demand shocks dominate and inflation expectations remain anchored.

2,019

2

neutral

1,683

However, if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated.

2,007

1

hawkish

1,684

I will focus my remarks today on the use of explicit forward guidance as a tool for monetary policy.1 Before I start, let me briefly discuss near-term monetary policy.

2,001

2

neutral

1,685

Participants judged that it would be appropriate to move the stance of monetary policy toward a neutral posture expeditiously.

2,011

2

neutral

1,686

That said, our model accords the greatest roles to increased productivity growth, which has made the United States a magnet for foreign saving, and to the slump in foreign domestic demand, which has led to an excess of saving in those economies.

2,007

0

dovish

1,687

But, again underscoring an earlier point, this tightness of the labor market has not manifested itself in ongoing escalation of wage inflation.

2,004

1

hawkish

1,688

In keeping with its usual procedures under the Humphrey-Hawkins Act, the Committee would review its ranges at midyear, or sooner if interim conditions warranted, in light of the growth and velocity behavior of the aggregates and ongoing economic and financial developments.

1,999

2

neutral

1,689

You might ask: Does successful monetary policymaking really require all this additional knowledge?

1,999

2

neutral

1,690

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.

2,001

2

neutral

1,691

Inflation in 1996, measured by the chain price index for GDP or the core CPI, was the lowest in 30 years.

2,005

0

dovish

1,692

Reports from several Districts suggested that firms had greater scope than in the recent past to raise prices in response to strong demand or increases in input costs, including those associated with tariff increases and recent rises in fuel and freight expenses.

2,012

1

hawkish

1,693

The median expectation for inflation over the next 5 to 10 years from the Michigan survey edged down in October to a new historical low,

2,010

0

dovish

1,694

It is generally thought that monetary policy takes many months to have most of its effect on the growth of output and employment, while, of course, it has an immediate impact on financial markets.

2,020

2

neutral

1,695

The members concluded that retaining a risk statement weighted toward more inflation pressures would best represent their current thinking, but they believed it was desirable to provide some recognition of the emergence of increased downside risks to the economic expansion in the statement to be released after this meeting.

2,006

1

hawkish

1,696

They also generally expected that further gradual increases in the target range for the federal funds rate would be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term.

2,017

1

hawkish

1,697

Pressures on resources would rise as the anticipated upturn and possible above-trend growth brought the economy closer to full capacity utilization.

1,996

1

hawkish

1,698

The Federal Reserve Bank of New York was authorized and directed, until instructed otherwise by the Committee, to execute transactions in the System Account in accordance with the following domestic policy directive: The information reviewed at this meeting suggests that the expansion in economic activity has slowed considerably after a very rapid advance in the first quarter.

2,002

0

dovish

1,699

If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability.

2,015

0

dovish

1,700

Between the end of July and the FOMC's September meeting, we will get two employment and CPI reports with data for July and August.

2,000

2

neutral

1,701

Both total and core inflation were projected to move up slightly next year, as the low readings early this year were expected to be transitory, but nevertheless to continue to run below 2 percent.

2,011

0

dovish

1,702

But, certainly, we’ve had a lot of years in which interest rates have been low.

2,022

2

neutral

1,703

While participants viewed the downside risks to their forecasts of economic activity over the projection period as having diminished, their assessment of the most likely outcomes for economic activity and inflation over the projection period was not greatly changed.

2,004

2

neutral

1,704

Major stock price indexes were up a bit over the intermeeting period, as positive first-quarter earnings reports more than offset the negative effects of higher energy prices and rising interest rates.

2,017

1

hawkish

1,705

However, other participants noted that the continued subdued trend in wages was evidence of an absence of upward pressure on inflation from the current level of resource utilization.

2,006

0

dovish

1,706

Implications of Economic Theory I am going to assert some conclusions based on economic theory that help to understand the potential for monetary policy to achieve these objectives and the consistency among them.

2,022

2

neutral

1,707

the new statement maintains our definition that the longer-run goal for inflation is 2 percent, it elevates the importanceâ€”and the challengeâ€”of keeping inflation expectations well anchored at 2 percent in a world in which an effective-lower-bound constraint is, in downturns, binding on the federal funds rate.

2,000

2

neutral

1,708

Prominent among these risks were a possible intensification of strains in the euro zone, with potential spillovers to U. S. financial markets and institutions and thus to the broader U. S. economy; a larger-than-expected U. S. fiscal tightening; and the possibility of a further slowdown in global economic growth.

2,005

0

dovish

1,709

But speculators rarely succeed in dislodging an exchange rate that is firmly rooted in compatible policies and cost structures.

1,997

2

neutral

1,710

In their discussion of considerations related to asset purchases, various participants noted that these purchases were an important part of the monetary policy toolkit and a critical aspect of the Federal Reserve's response to the economic effects of the pandemic, supporting smooth financial market functioning and accommodative financial conditions, which aided the flow of credit to households and businesses and supported the recovery.

2,021

0

dovish

1,711

From the end of 2000 to the end of 2003, productivity rose at a 3-1/2 percent annual rate and, even after recent downward revisions to the data, it is estimated to have increased at an average annual rate of 2-1/4 percent since the end of 2003.

2,021

2

neutral

1,712

Several participants noted the increase in agricultural crop prices over 2020 and the associated improvement in farm revenues.

2,017

2

neutral

1,713

While a preemptive tightening move might be warranted in the not-too-distant future to help contain inflationary pressures in the economy, these members believed that a symmetrical directive would best convey the message that no tightening action was contemplated for the weeks immediately ahead.

2,017

1

hawkish

1,714

Recent increases in house prices and equity prices were positives,

2,007

2

neutral

1,715

May 26, 2021 The Economic Outlook and Monetary Policy Vice Chair for Supervision Randal K. Quarles At the Hutchins Center on Fiscal and Monetary Policy, The Brookings Institution, Washington, D.C. (via webcast) Share Watch Live Thank you, David, and thank you to Brookings and the Hutchins Center for the opportunity to lead things off and be part of this very distinguished panel.

2,017

2

neutral

1,716

Beyond 2017, the forecast for real GDP growth was little revised.

2,018

2

neutral

1,717

Their key finding, illustrated in figure 3, is that Federal Reserve policy rate surprises attributed to stronger U.S. growth generally have only moderate spillovers to EM financial conditions, whereas U.S. policy rate changes attributed to U.S. inflationary pressures trigger more substantial spillovers to EM financial conditions.

1,999

2

neutral

1,718

Members agreed that the Federal Reserve was committed to using its full range of tools to support the U. S. economy in this challenging time, thereby promoting its maximum-employment and price-stability goals.

2,003

0

dovish

1,720

Potentially, waiting could require more disruptive policy tightening actions later and could risk the credibility of the System's anti-inflation policy.

2,001

1

hawkish

1,721

In particular, the unemployment rates in the metropolitan areas of South Dakota have consistently been lower than in rural areas, and this relative abundance of job opportunities has tended to encourage migration to areas such as Sioux Falls.

2,021

2

neutral

1,722

Therefore, even in the case of personal computers, where we have made such great strides in measuring quality changes, I suspect that important phenomena still may not be adequately captured by our published price indexes.

2,008

2

neutral

1,723

What implications do these results have for our broader understanding and for the practice of monetary policy?

2,022

2

neutral

1,724

In contrast, in cases in which variations in the demand for reserves or in external factors affecting reserve supply appear likely to be temporary, the Desk typically prefers to conduct open-market operations through short-term or long-term repurchase agreements, known as repos.

2,007

2

neutral

1,725

A few participants expressed less confidence in this outlook for inflation and commented that inflation had averaged less than 2 percent over the past several years even as resource utilization had increased, or pointed to downward pressures from global or technology-related factors that could continue to suppress inflation.

2,020

0

dovish

1,726

Financial markets are the channel through which our policy affects the economy, and asset prices contain valuable information about investors' expectations for the course of policy, economic activity, and inflation, as well as about the risks around those expectations.

2,005

2

neutral

1,728

In general, participants viewed recent consumer price developments as consistent with their expectation that inflation was on a trajectory to achieve the Committee's symmetric 2 percent objective on a sustained basis.

1,999

2

neutral

1,729

Many potential inflation targeters ask, "Why not zero?"

1,999

2

neutral

1,730

So, you know, I can’t—all I can tell you is, we’ll be looking at weak global growth.

2,014

0

dovish

1,731

An environment involving such interest rates could have adverse repercussions on the functioning of some sectors of the money market, but the members agreed that the potential extent of such disruptions would not be sufficient to prevent the Committee from taking advantage of the full scope of conventional easing of the federal funds rate, should that become necessary.

2,002

0

dovish

1,732

The result could be cross-border spillovers from the increase in U.S. domestic demand, reducing the effect on U.S. real activity and inflation and potentially contributing to external imbalances.

2,020

2

neutral

1,733

The central tendency of the unemployment rate projections is slightly lower than in the March projections and now stands at 6.0 to 6.1 percent at the end of this year.

2,012

0

dovish

1,734

While more moderate growth in consumer spending for durable goods seemed likely after an extended period of robust expansion, these favorable factors suggested that the risks of a different outcome were tilted in the direction of faster-than-projected expansion.

2,002

1

hawkish

1,735

And in so far as that will affect monetary policy, of course we will have to factor those policies along with many other things, including the global environment and oil prices and other matters.

2,013

2

neutral

1,736

However, the deficit was up appreciably from its average for the first quarter, with the value of imports increasing substantially more than the value of exports.

1,998

1

hawkish

1,737

This is the scenario from which we draw the lesson that timely, typically preemptive, policy restraint to avoid the excesses of a boom results in longer expansions and avoids unnecessary fluctuations in both output and inflation.

2,020

1

hawkish

1,738

Advances in productivity had boosted profit margins, and high margins were helpful in that they could absorb some portion of any cost increases for a time.

2,015

2

neutral

1,739

Over the medium term, participants expected strong growth in employment, driven by continued progress on vaccinations and an associated rebound of economic activity and of consumer and business confidence, as well as accommodative fiscal and monetary policy.

2,012

0

dovish

1,740

That's why I said that flexibility is also an important characteristic of monetary policy during a time of financial turmoil.

2,005

0

dovish

1,741

Three Asset-Price-Bust Episodes Let us first examine the U.K. recession of 1974.

2,007

2

neutral

1,742

Our goal of price stability was achieved by most analysts' definition by mid-2003.

2,002

0

dovish

1,743

So I, you know, I’m—I feel quite comfortable that we can—in particular, that we can raise interest rates at the appropriate time, even if the balance sheet remains large for an extended period.

2,020

1

hawkish

1,744

The changes to the policy statement that we made over the past few FOMC meetings bring our policy guidance in line with the new framework outlined in the revised Statement on Longer-Run Goals and Monetary Policy Strategy that the Committee approved last August.4 In our new framework, we acknowledge that policy decisions going forward will be based on the FOMC's estimates of "shortfalls [emphasis added] of employment from its maximum level"â€”not "deviations."

2,005

0

dovish

1,745

These participants stated that, in such circumstances, a major challenge facing policymakers—especially in the presence of the effective lower bound on the federal funds rate—was to maintain a policy stance sufficiently accommodative to keep average inflation at 2 percent and thereby bolster the credibility of the Committee's new policy framework, facilitating the achievement of both maximum employment and price stability.

2,007

0

dovish

1,746

It will include all data relevant to our dual mandate of stable prices and maximum employment.

2,020

2

neutral

1,747

M2 growth picked up appreciably during December and January, evidently reflecting extra demands for liquidity and safety during the century-date-change period.

2,008

0

dovish

1,748

The unwinding in the early months of 1997 of special factors that had boosted net exports in the fourth quarter of 1996 was offsetting some of the effects on production of the persisting strength in domestic demand.

2,012

2

neutral

1,749

More recently, with inflation under control, overheating has shown up in the form of financial excess.

2,002

1

hawkish

1,751

Japan enjoyed effective price stability through most of the 1980s.

2,004

2

neutral

1,752

That is a positive for growth.

2,016

2

neutral

1,753

The vote encompassed approval of the statement below to be released at 2:00 p. m. : "Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions.

2,001

2

neutral

1,754

The guidance indicates an expectation that it will be appropriate to maintain the current target range of the federal funds rate until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.

1,997

2

neutral

1,755

still outpace that of potential over this period, leading to a decline in the unemployment rate to historically low levels, as monetary policy was assumed to remain highly accommodative.

2,008

0

dovish