TextCEsInFinance/fomc-communication

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309	thought that potential output growth was likely to be a bit higher than forecast by the staff.	2,010	2	neutral
310	It is worth noting that today the economy is very strong and is well positioned to handle tighter monetary policy.	2,000	1	hawkish
311	Market-based measures of inflation compensation had remained low,	2,020	0	dovish
312	I don’t know that demand for reserves has risen over the past years.	2,013	2	neutral
313	One objective--price stability--can be well defined and is fully under the control of monetary policymakers, at least over a period of time.	2,020	2	neutral
314	As a case in point, the increase in the transparency of U.S. monetary policy over the past two decades has been quite significant.	2,017	2	neutral
315	They also generally expected that inflation would remain, for some time, below levels the Committee considers most consistent, over the longer run, with maximum employment and price stability.	2,017	0	dovish
316	The members agreed that the statement to be issued after this meeting should highlight their view that even after their firming today the risks remained weighted mainly in the direction of rising inflation pressures.	2,006	1	hawkish
317	continued to anticipate a moderate strengthening of the expansion in 2011 as well as a further pickup in economic growth in 2012.	2,000	2	neutral
318	In light of the robust expansion of capital spending thus far this year, the outlook for business investment spending was revised up appreciably, as more of the strength over the latter part of 2004 was attributed to underlying demand and less to the effects of the partial-expensing tax provision.	2,004	1	hawkish
319	The Federal Reserve is taking action to keep inflation expectations anchored and bring inflation back to 2 percent over time.1 While last year's rapid pace of economic growth was boosted by accommodative fiscal and monetary policy as well as reopening, demand has moderated this year as those tailwinds have abated.	2,007	1	hawkish
320	Indeed, in the IMF's latest World Economic Outlook, four out of five countries in this group are expected to post inflation rates between 1 percent and 3 percent this year.	2,005	2	neutral
321	The Federal Reserve’s enhanced guidance about its policy intentions and its substantial and still-increasing holdings of longer-term securities will ensure that monetary policy remains highly accommodative, consistent with the pursuit of its mandated objectives of maximum employment and price stability.	2,020	0	dovish
322	Notwithstanding the shift toward monetary policy committees, each central bank and its institutional structure reflects the politics and culture of the country that it serves (or "countries" in the case of the European Central Bank).	2,003	2	neutral
323	Monetary Policy in a World without Treasuries Today, monetary policy decisions are implemented through a mix of outright purchases and sales of assets held in the Fed's portfolio, temporary operations through repurchase agreements, and discount window loans.2 It seems to me that the same three operations, though perhaps in different proportions, could be used in the absence of Treasury securities.	2,021	2	neutral
324	You’ll never get inflation to 2 percent.” Some of our critics now who say inflation’s too tight—too high were the same ones who were saying, “You’ll never get to 2 percent.” Well, but anyway, that’s what happened.	2,014	2	neutral
325	For 2000, the Committee agreed on a tentative basis in June to retain the same ranges for growth of the monetary aggregates and debt, measured from the fourth quarter of 1999 to the fourth quarter of 2000.	2,007	2	neutral
326	With longer-run inflation expectations assumed to remain stable, changes in commodity and import prices expected to be modest, and significant resource slack persisting over the forecast period, inflation was forecast to be subdued through 2015.	1,999	2	neutral
327	Nonetheless, with the unemployment rate anticipated to increase somewhat during the remainder of 2009 and to decline only gradually in 2010, the staff still expected core PCE inflation to slow substantially over the forecast period; the very low readings on hourly compensation lately suggested that such a process might already be in train.	1,996	0	dovish
329	Such forces can also cause short-term fluctuations in the economy that are, at least in part, beyond the control of monetary policy.	2,004	2	neutral
330	Most analysts would contend that U.S. interest rates were lowered by the world's accumulation of dollars.	2,013	0	dovish
331	So I don’t have a sense—the Committee doesn’t try to gauge what is the right level of equity prices.	2,020	2	neutral
332	And—and we do that with measures that—that, you know, keep people in their homes; that—that support hiring; that support growth; that avoid unnecessary, avoidable business insolvencies.	2,011	2	neutral
333	The delays often reflected concerns about the putative costs and risks of these policies, such as stoking high inflation and impairing market functioning.	2,004	1	hawkish
334	A key factor in this assessment continued to be their outlook for rapid further gains in structural productivity that would help to hold down increases in unit labor costs.	2,014	2	neutral
335	But a longer-term trend--slow productivity growth--helps explain why we don't think dramatic interest rate increases are required to move our federal funds rate target back to neutral.	2,022	1	hawkish
336	On balance, while the business investment outlook seemed vulnerable to somewhat greater than projected weakness in the short run, the members were persuaded that, against the background of large continuing gains in structural productivity and cost savings from further investment in equipment and software, business firms were likely to accelerate their spending for new capital after a period of adjustment.	2,001	2	neutral
337	This outcome would be entirely consistent with the new framework we adopted in August 2020 and began to implement at our September 2020 FOMC meeting.3 In our new framework, we aim for inflation outcomes that keep inflation expectations well anchored at 2 percent.	2,006	1	hawkish
338	One member was persuaded that policy had already become so expansionary that further easing ran an unacceptable risk of exacerbating inflation over time.	1,999	1	hawkish
339	Looking ahead, reports from retailer contacts were somewhat mixed; many anticipated relatively depressed holiday sales and where possible were making efforts to limit buildups of holiday merchandise, while other retailers were confident that sales would be reasonably well maintained, albeit generally somewhat below levels or growth rates experienced in previous holiday seasons.	2,019	2	neutral
340	The underlying rate of consumer price inflation in recent months was lower than the staff expected at the time of the November meeting, and the staff forecast anticipated that core PCE prices would rise a bit more slowly in 2011 and 2012 than previously projected.	2,003	0	dovish
342	But again, our basic forecast is one which is basically, as was pointed out earlier by Mr. Hilsenrath, a moderately optimistic forecast, where growth picks up as we pass through this period of fiscal restraint	2,018	2	neutral
343	Companies can keep their focus on cutting costs and increasing productivity; they can foster research and innovation; they can offer training and employee incentives to acquire more education and skills.	2,007	2	neutral
344	indeed, inflation might edge a bit lower in the early stages of the expansion.	2,006	0	dovish
345	More information might provide a better sense of how the higher interest rates were affecting aggregate demand and perhaps also help--to a small degree--to shed light on the considerable uncertainties surrounding the relationship of output to inflation.	2,018	1	hawkish
346	Participants agreed that the longer-run normal federal funds rate was likely lower than in the past, in part because of secular forces that had put downward pressure on real interest rates.	2,004	0	dovish
347	Rather, central banks have learned over the years that their policies should be devoted to fostering macroeconomic balance and price stability.	2,005	1	hawkish
348	Almost all participants reaffirmed the view that further gradual increases in the target range for the federal funds rate would likely be consistent with sustaining the Committee's objectives of maximum employment and price stability.	2,001	1	hawkish
349	Against this background, the risks in the outlook for prices also seemed to be tilted toward somewhat higher inflation.	1,997	1	hawkish
350	For these reasons, I have been interested in exploring approaches that expand the space for targeting interest rates in a more continuous fashion as an extension of our conventional policy space and in a way that reinforces forward guidance on the policy rate.18 In particular, there may be advantages to an approach that caps interest rates on Treasury securities at the short-to-medium range of the maturity spectrumâ€”yield curve capsâ€”in tandem with forward guidance that conditions liftoff from the ELB on employment and inflation outcomes.	2,020	0	dovish
352	We’re not seeing evidence in labor markets of very substantial upward pressures on labor that could signify extreme shortages of labor that could propel inflation higher in a very rapid way, and inflation is still operating below our objective.	2,022	0	dovish
353	But in the shorter run, we must also develop strategies to overcome the education deficiencies of all too many of our young people, and to renew the skills of workers who have not kept up with the changing demands of the workplace.	1,998	2	neutral
354	Some price increases had been noted	2,017	1	hawkish
355	The external sector was expected to exert a small restraining influence on economic activity over the projection period.	2,021	0	dovish
356	In my comments today, I will focus on the Fed's efforts to promote our maximum employment and price stability goals amid this upheaval, and suggest how lessons from history and a careful focus on incoming data and the evolving risks offer useful guidance for today's unique monetary policy challenges.	1,999	2	neutral
358	We have Chair Yellen’s Press Conference FINAL households who are becoming more comfortable with their debt levels and more able to service that debt, an improving job market.	2,015	1	hawkish
359	Long-term sovereign bond yields declined notably in the advanced economies, in part as foreign central banks announced additional monetary policy easing measures.	2,019	0	dovish
360	Nonetheless, many participants expressed concern that ongoing developments in the housing market could have a more pronounced impact on consumer and other spending, especially if house prices declined significantly.	2,019	0	dovish
361	Moreover, the absence of significant growth in employment, should it persist, could at some point have significant adverse repercussions on consumer spending.	2,011	0	dovish
362	During the period examined, the rate of overall consumer inflation was 2.78 percent, as measured by the regular CPI-U for All Items.	2,000	1	hawkish
363	While overall employment conditions, the buildup of household net worth, and access to financing would bolster consumer expendi- tures, members also cited a number of limiting factors.	2,004	2	neutral
364	The nominal deficit on U. S. trade in goods and services narrowed somewhat in August from a high rate in July	2,016	0	dovish
365	Though labor markets were expected to remain relatively tight for some time, the members saw little prospect that inflation would gather significant momentum in coming quarters.	2,000	2	neutral
366	Participants noted that the timing of the resumption of growth in the U. S. economy depended on the containment measures put in place, as well as the success of those measures, and on the responses of other policies, including fiscal policy.	2,011	2	neutral
367	So in—in—in U-6, the U-6 level of unemployment has tripled from 7 percent to 21 percent.	2,016	0	dovish
368	Moreover, to the extent that more-rapid growth of productivity shows through to faster gains in nominal wages, there will be fewer instances in which nominal wages will be pressured to fall.	2,021	2	neutral
369	Implications of Increases in Productivity Growth In the long run, the implications of increases in productivity growth rates are fairly obvious.	2,022	0	dovish
370	The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.	2,021	1	hawkish
371	This direction of causality may obscure the negative relationship, running from higher inflation to lower growth, presumed to hold in the longer term.	2,003	1	hawkish
372	Weaker demand and significantly lower oil prices are holding down consumer price inflation.	2,015	0	dovish
373	And as I mentioned earlier, the unemployment decline last month was more than 100 percent accounted for by declines in participation.	2,019	0	dovish
374	Well, we—as a Committee, we do not desire inflation undershoots.	2,020	0	dovish
375	It is not a Taylor rule but it has the same feature that it relates policy to observables in the economy, such as unemployment and inflation.	2,018	2	neutral
376	Some participants judged the risks to the outlook for inflation as tilted to the downside, particularly in the near term, in light of the large amount of resource slack already prevailing in the economy, the significant downside risks to the outlook for real activity, and the possibility that inflation expectations could begin to decline in response to low actual inflation.	2,006	0	dovish
378	Moreover, if declines in house prices were to damp consumption, that could feed back on employment and income, exerting additional restraint on the demand for housing.	2,003	0	dovish
380	Most survey-based measures of longer-term inflation expectations had been little changed in recent months.	2,005	2	neutral
381	During the past several years, workers across the wage distribution--not just at the upper end--have seen noticeable increases in the inflation-adjusted value of their wages.	2,000	1	hawkish
382	The idea is that providing more information about the Committee's views of the economic outlook may allow financial market prices to reflect more accurately the likely future stance of monetary policy.	1,997	2	neutral
383	We need to avoid expectations rising so much that they become a factor that drives inflation higher.	2,021	1	hawkish
384	So far this year, payroll employment had expanded at a faster pace than last year and the unemployment rate had declined further, although it remained elevated.	2,018	2	neutral
385	The pace of inventory liquidation was thought likely to moderate in coming quarters and subsequently turn to accumulation as inventories came into better balance with sales, with increasingly positive implications for overall production and economic activity.	2,013	1	hawkish
386	Historically, recessions often occurred when the Fed tightened to control inflation.	2,007	2	neutral
388	At some point, continued large-scale trade deficits could trigger equilibrating, and possibly dislocating, changes in prices, interest rates, and exchange rates.	2,022	1	hawkish
389	Indeed, given the externalities involved, it seems plausible that a monopoly central bank that issued fiat money would not respond optimally to crises (it would charge too much for liquidity) or to cyclical variations (it would be maximizing the present discounted value of its seigniorage income rather than minimizing some weighted sum of discounted inflation and output losses).	2,006	2	neutral
390	Consumer credit jumped in May and remained strong in June, reflecting a rebound in credit card balances and continued robust growth in auto loans.	2,006	2	neutral
391	A fifth factor is supply bottlenecks that manufacturers and importers are currently experiencing; supply chain constraints are boosting prices, particularly for goodsâ€”less so for services.	1,997	1	hawkish
392	The Committee also noted in March that although output had continued to expand at a solid pace, new hiring had lagged, and increases in core consumer prices were muted and expected to remain low.	2,016	0	dovish
393	Vice Chair Richard H. Clarida At the 2020 U.S. Monetary Policy Forum, sponsored by the Initiative on Global Markets at the University of Chicago Booth School of Business, New York, New York Share Thank you to the conference organizers for inviting me here to discuss what former Chair Bernanke has famously referred to as a "hall of mirrors" problem: a situation in which a central bank's reaction function and financial market prices interact in economically suboptimal and potentially destabilizing ways.1 In my remarks today, I will lay out the way I think about the interplay between financial markets and monetary policy, with a focus on how I myself seek to integrate noisy but often correlated signals about the economy that I glean from models, surveys, and financial markets.2 Three Observations I begin with three unobjectionable observations.	2,019	2	neutral
395	they rebounded late in the period in response to the release of firmer economic data and growing concerns regarding the sustainability of current domestic asset prices.	2,016	0	dovish
396	However, a couple of participants noted that the recent oil price decline could also be associated with increasing oil supply rather than softening global demand.	1,996	0	dovish
397	In his view, historical precedents suggested that prolonged periods of taut labor markets were eventually associated with rising inflation.	1,999	1	hawkish
398	The technical measures we are undertaking do not represent a change in the stance of monetary policy, which we continue to implement by adjusting the target range for the federal funds rate.	2,021	2	neutral
399	A few participants argued that maintaining a highly accommodative stance of monetary policy over the medium run would erode the stability of inflation expectations.	1,996	1	hawkish
400	For example, in his monetary policy testimony of July 1992, Chairman Greenspan said, "As I have often noted to this committee, the most important contribution the Federal Reserve can make to encouraging the highest sustainable growth the U.S. economy can deliver over time is to provide a backdrop of reasonably stable prices on average for business and household decisionmaking" (Greenspan, 1992, pp.	1,997	1	hawkish
401	Job growth last month was fairly widespread, although heavy hiring in the construction sector was due partly to efforts to repair damage from the four hurricanes that hit the southeastern states.	2,005	2	neutral
402	In particular, participants judged that communicating the Committee's expectation that short-term interest rates were likely to stay exceptionally low for some time could be useful because it could lead to pricing of longer-term interest rates consistent with the path of monetary policy that policymakers saw as most likely.	2,003	0	dovish
403	Our Congressional mandate is to achieve full employment and price stability in the United States.	2,002	1	hawkish
404	This policy preference was based on expectations of growth in business activity at a pace averaging in the vicinity of the economy's potential, a perception among the members that the risks to such an outlook were more balanced than earlier, and anticipations that under these circumstances inflation would remain constrained.	2,004	2	neutral
405	Since the previous FOMC meeting, spreads on municipal bonds narrowed substantially, on net, moving near levels observed for several years before the pandemic, as investor demand exhibited some recovery over much of the period from earlier weak levels.	2,003	0	dovish
406	These headwinds—which include developments abroad, subdued household formation, and meager productivity growth—could persist for some time.	2,022	0	dovish
407	(4') U** = U* - (1/b) [q - q] U* = short-run or effective NAIRU However, once productivity growth stabilizes at a higher level, q* will eventually catch up to q, and the disinflationary effect will gradually diminish and then completely disappear.	2,007	2	neutral
408	most survey-based measures of longer-term inflation expectations were little changed, on balance, in recent months.	2,013	2	neutral
409	The Federal Reserve and ECB Framework Reviews The monetary policy framework reviews conducted by the Federal Reserve and the ECB provide another example of monetary policy correlation.	2,007	2	neutral
410	And downward revisions to the longer-run normal unemployment rate in a way suggests that participants are seeing more slack in the economy now than they previously did.	2,013	2	neutral
411	Even so, the growth rate of the ECI did not return to the levels experienced before 2008.	2,003	2	neutral
412	In 2019, sluggish growth abroad and global developments weighed on investment, exports, and manufacturing in the United States,	2,022	0	dovish
413	I believe the current move can be justified in a forward-looking variant of the Taylor Rule, where today's policy depends on the forecast of future output gaps and inflation.	2,003	2	neutral
414	One participant suggested that the economic projections would be more understandable if they were based on a common interest rate path.	2,019	2	neutral
415	Monetary Policy But it is monetary policy--and the Fed's principal monetary lever, the federal funds rate, which is the interest rate on overnight loans of reserves between depository institutions--that earns the Federal Reserve all that ink and airtime.	2,020	2	neutral
416	Although members generally saw little risk that maintaining very low short-term interest rates could raise inflation expectations or create instability in asset markets, they noted that it was important to remain alert to these risks.	2,005	0	dovish

309

thought that potential output growth was likely to be a bit higher than forecast by the staff.

2,010

2

neutral

310

It is worth noting that today the economy is very strong and is well positioned to handle tighter monetary policy.

2,000

1

hawkish

311

Market-based measures of inflation compensation had remained low,

2,020

0

dovish

312

I don’t know that demand for reserves has risen over the past years.

2,013

2

neutral

313

One objective--price stability--can be well defined and is fully under the control of monetary policymakers, at least over a period of time.

2,020

2

neutral

314

As a case in point, the increase in the transparency of U.S. monetary policy over the past two decades has been quite significant.

2,017

2

neutral

315

They also generally expected that inflation would remain, for some time, below levels the Committee considers most consistent, over the longer run, with maximum employment and price stability.

2,017

0

dovish

316

The members agreed that the statement to be issued after this meeting should highlight their view that even after their firming today the risks remained weighted mainly in the direction of rising inflation pressures.

2,006

1

hawkish

317

continued to anticipate a moderate strengthening of the expansion in 2011 as well as a further pickup in economic growth in 2012.

2,000

2

neutral

318

In light of the robust expansion of capital spending thus far this year, the outlook for business investment spending was revised up appreciably, as more of the strength over the latter part of 2004 was attributed to underlying demand and less to the effects of the partial-expensing tax provision.

2,004

1

hawkish

319

The Federal Reserve is taking action to keep inflation expectations anchored and bring inflation back to 2 percent over time.1 While last year's rapid pace of economic growth was boosted by accommodative fiscal and monetary policy as well as reopening, demand has moderated this year as those tailwinds have abated.

2,007

1

hawkish

320

Indeed, in the IMF's latest World Economic Outlook, four out of five countries in this group are expected to post inflation rates between 1 percent and 3 percent this year.

2,005

2

neutral

321

The Federal Reserve’s enhanced guidance about its policy intentions and its substantial and still-increasing holdings of longer-term securities will ensure that monetary policy remains highly accommodative, consistent with the pursuit of its mandated objectives of maximum employment and price stability.

2,020

0

dovish

322

Notwithstanding the shift toward monetary policy committees, each central bank and its institutional structure reflects the politics and culture of the country that it serves (or "countries" in the case of the European Central Bank).

2,003

2

neutral

323

Monetary Policy in a World without Treasuries Today, monetary policy decisions are implemented through a mix of outright purchases and sales of assets held in the Fed's portfolio, temporary operations through repurchase agreements, and discount window loans.2 It seems to me that the same three operations, though perhaps in different proportions, could be used in the absence of Treasury securities.

2,021

2

neutral

324

You’ll never get inflation to 2 percent.” Some of our critics now who say inflation’s too tight—too high were the same ones who were saying, “You’ll never get to 2 percent.” Well, but anyway, that’s what happened.

2,014

2

neutral

325

For 2000, the Committee agreed on a tentative basis in June to retain the same ranges for growth of the monetary aggregates and debt, measured from the fourth quarter of 1999 to the fourth quarter of 2000.

2,007

2

neutral

326

With longer-run inflation expectations assumed to remain stable, changes in commodity and import prices expected to be modest, and significant resource slack persisting over the forecast period, inflation was forecast to be subdued through 2015.

1,999

2

neutral

327

Nonetheless, with the unemployment rate anticipated to increase somewhat during the remainder of 2009 and to decline only gradually in 2010, the staff still expected core PCE inflation to slow substantially over the forecast period; the very low readings on hourly compensation lately suggested that such a process might already be in train.

1,996

0

dovish

329

Such forces can also cause short-term fluctuations in the economy that are, at least in part, beyond the control of monetary policy.

2,004

2

neutral

330

Most analysts would contend that U.S. interest rates were lowered by the world's accumulation of dollars.

2,013

0

dovish

331

So I don’t have a sense—the Committee doesn’t try to gauge what is the right level of equity prices.

2,020

2

neutral

332

And—and we do that with measures that—that, you know, keep people in their homes; that—that support hiring; that support growth; that avoid unnecessary, avoidable business insolvencies.

2,011

2

neutral

333

The delays often reflected concerns about the putative costs and risks of these policies, such as stoking high inflation and impairing market functioning.

2,004

1

hawkish

334

A key factor in this assessment continued to be their outlook for rapid further gains in structural productivity that would help to hold down increases in unit labor costs.

2,014

2

neutral

335

But a longer-term trend--slow productivity growth--helps explain why we don't think dramatic interest rate increases are required to move our federal funds rate target back to neutral.

2,022

1

hawkish

336

On balance, while the business investment outlook seemed vulnerable to somewhat greater than projected weakness in the short run, the members were persuaded that, against the background of large continuing gains in structural productivity and cost savings from further investment in equipment and software, business firms were likely to accelerate their spending for new capital after a period of adjustment.

2,001

2

neutral

337

This outcome would be entirely consistent with the new framework we adopted in August 2020 and began to implement at our September 2020 FOMC meeting.3 In our new framework, we aim for inflation outcomes that keep inflation expectations well anchored at 2 percent.

2,006

1

hawkish

338

One member was persuaded that policy had already become so expansionary that further easing ran an unacceptable risk of exacerbating inflation over time.

1,999

1

hawkish

339

Looking ahead, reports from retailer contacts were somewhat mixed; many anticipated relatively depressed holiday sales and where possible were making efforts to limit buildups of holiday merchandise, while other retailers were confident that sales would be reasonably well maintained, albeit generally somewhat below levels or growth rates experienced in previous holiday seasons.

2,019

2

neutral

340

The underlying rate of consumer price inflation in recent months was lower than the staff expected at the time of the November meeting, and the staff forecast anticipated that core PCE prices would rise a bit more slowly in 2011 and 2012 than previously projected.

2,003

0

dovish

342

But again, our basic forecast is one which is basically, as was pointed out earlier by Mr. Hilsenrath, a moderately optimistic forecast, where growth picks up as we pass through this period of fiscal restraint

2,018

2

neutral

343

Companies can keep their focus on cutting costs and increasing productivity; they can foster research and innovation; they can offer training and employee incentives to acquire more education and skills.

2,007

2

neutral

344

indeed, inflation might edge a bit lower in the early stages of the expansion.

2,006

0

dovish

345

More information might provide a better sense of how the higher interest rates were affecting aggregate demand and perhaps also help--to a small degree--to shed light on the considerable uncertainties surrounding the relationship of output to inflation.

2,018

1

hawkish

346

Participants agreed that the longer-run normal federal funds rate was likely lower than in the past, in part because of secular forces that had put downward pressure on real interest rates.

2,004

0

dovish

347

Rather, central banks have learned over the years that their policies should be devoted to fostering macroeconomic balance and price stability.

2,005

1

hawkish

348

Almost all participants reaffirmed the view that further gradual increases in the target range for the federal funds rate would likely be consistent with sustaining the Committee's objectives of maximum employment and price stability.

2,001

1

hawkish

349

Against this background, the risks in the outlook for prices also seemed to be tilted toward somewhat higher inflation.

1,997

1

hawkish

350

For these reasons, I have been interested in exploring approaches that expand the space for targeting interest rates in a more continuous fashion as an extension of our conventional policy space and in a way that reinforces forward guidance on the policy rate.18 In particular, there may be advantages to an approach that caps interest rates on Treasury securities at the short-to-medium range of the maturity spectrumâ€”yield curve capsâ€”in tandem with forward guidance that conditions liftoff from the ELB on employment and inflation outcomes.

2,020

0

dovish

352

We’re not seeing evidence in labor markets of very substantial upward pressures on labor that could signify extreme shortages of labor that could propel inflation higher in a very rapid way, and inflation is still operating below our objective.

2,022

0

dovish

353

But in the shorter run, we must also develop strategies to overcome the education deficiencies of all too many of our young people, and to renew the skills of workers who have not kept up with the changing demands of the workplace.

1,998

2

neutral

354

Some price increases had been noted

2,017

1

hawkish

355

The external sector was expected to exert a small restraining influence on economic activity over the projection period.

2,021

0

dovish

356

In my comments today, I will focus on the Fed's efforts to promote our maximum employment and price stability goals amid this upheaval, and suggest how lessons from history and a careful focus on incoming data and the evolving risks offer useful guidance for today's unique monetary policy challenges.

1,999

2

neutral

358

We have Chair Yellen’s Press Conference FINAL households who are becoming more comfortable with their debt levels and more able to service that debt, an improving job market.

2,015

1

hawkish

359

Long-term sovereign bond yields declined notably in the advanced economies, in part as foreign central banks announced additional monetary policy easing measures.

2,019

0

dovish

360

Nonetheless, many participants expressed concern that ongoing developments in the housing market could have a more pronounced impact on consumer and other spending, especially if house prices declined significantly.

2,019

0

dovish

361

Moreover, the absence of significant growth in employment, should it persist, could at some point have significant adverse repercussions on consumer spending.

2,011

0

dovish

362

During the period examined, the rate of overall consumer inflation was 2.78 percent, as measured by the regular CPI-U for All Items.

2,000

1

hawkish

363

While overall employment conditions, the buildup of household net worth, and access to financing would bolster consumer expendi- tures, members also cited a number of limiting factors.

2,004

2

neutral

364

The nominal deficit on U. S. trade in goods and services narrowed somewhat in August from a high rate in July

2,016

0

dovish

365

Though labor markets were expected to remain relatively tight for some time, the members saw little prospect that inflation would gather significant momentum in coming quarters.

2,000

2

neutral

366

Participants noted that the timing of the resumption of growth in the U. S. economy depended on the containment measures put in place, as well as the success of those measures, and on the responses of other policies, including fiscal policy.

2,011

2

neutral

367

So in—in—in U-6, the U-6 level of unemployment has tripled from 7 percent to 21 percent.

2,016

0

dovish

368

Moreover, to the extent that more-rapid growth of productivity shows through to faster gains in nominal wages, there will be fewer instances in which nominal wages will be pressured to fall.

2,021

2

neutral

369

Implications of Increases in Productivity Growth In the long run, the implications of increases in productivity growth rates are fairly obvious.

2,022

0

dovish

370

The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

2,021

1

hawkish

371

This direction of causality may obscure the negative relationship, running from higher inflation to lower growth, presumed to hold in the longer term.

2,003

1

hawkish

372

Weaker demand and significantly lower oil prices are holding down consumer price inflation.

2,015

0

dovish

373

And as I mentioned earlier, the unemployment decline last month was more than 100 percent accounted for by declines in participation.

2,019

0

dovish

374

Well, we—as a Committee, we do not desire inflation undershoots.

2,020

0

dovish

375

It is not a Taylor rule but it has the same feature that it relates policy to observables in the economy, such as unemployment and inflation.

2,018

2

neutral

376

Some participants judged the risks to the outlook for inflation as tilted to the downside, particularly in the near term, in light of the large amount of resource slack already prevailing in the economy, the significant downside risks to the outlook for real activity, and the possibility that inflation expectations could begin to decline in response to low actual inflation.

2,006

0

dovish

378

Moreover, if declines in house prices were to damp consumption, that could feed back on employment and income, exerting additional restraint on the demand for housing.

2,003

0

dovish

380

Most survey-based measures of longer-term inflation expectations had been little changed in recent months.

2,005

2

neutral

381

During the past several years, workers across the wage distribution--not just at the upper end--have seen noticeable increases in the inflation-adjusted value of their wages.

2,000

1

hawkish

382

The idea is that providing more information about the Committee's views of the economic outlook may allow financial market prices to reflect more accurately the likely future stance of monetary policy.

1,997

2

neutral

383

We need to avoid expectations rising so much that they become a factor that drives inflation higher.

2,021

1

hawkish

384

So far this year, payroll employment had expanded at a faster pace than last year and the unemployment rate had declined further, although it remained elevated.

2,018

2

neutral

385

The pace of inventory liquidation was thought likely to moderate in coming quarters and subsequently turn to accumulation as inventories came into better balance with sales, with increasingly positive implications for overall production and economic activity.

2,013

1

hawkish

386

Historically, recessions often occurred when the Fed tightened to control inflation.

2,007

2

neutral

388

At some point, continued large-scale trade deficits could trigger equilibrating, and possibly dislocating, changes in prices, interest rates, and exchange rates.

2,022

1

hawkish

389

Indeed, given the externalities involved, it seems plausible that a monopoly central bank that issued fiat money would not respond optimally to crises (it would charge too much for liquidity) or to cyclical variations (it would be maximizing the present discounted value of its seigniorage income rather than minimizing some weighted sum of discounted inflation and output losses).

2,006

2

neutral

390

Consumer credit jumped in May and remained strong in June, reflecting a rebound in credit card balances and continued robust growth in auto loans.

2,006

2

neutral

391

A fifth factor is supply bottlenecks that manufacturers and importers are currently experiencing; supply chain constraints are boosting prices, particularly for goodsâ€”less so for services.

1,997

1

hawkish

392

The Committee also noted in March that although output had continued to expand at a solid pace, new hiring had lagged, and increases in core consumer prices were muted and expected to remain low.

2,016

0

dovish

393

Vice Chair Richard H. Clarida At the 2020 U.S. Monetary Policy Forum, sponsored by the Initiative on Global Markets at the University of Chicago Booth School of Business, New York, New York Share Thank you to the conference organizers for inviting me here to discuss what former Chair Bernanke has famously referred to as a "hall of mirrors" problem: a situation in which a central bank's reaction function and financial market prices interact in economically suboptimal and potentially destabilizing ways.1 In my remarks today, I will lay out the way I think about the interplay between financial markets and monetary policy, with a focus on how I myself seek to integrate noisy but often correlated signals about the economy that I glean from models, surveys, and financial markets.2 Three Observations I begin with three unobjectionable observations.

2,019

2

neutral

395

they rebounded late in the period in response to the release of firmer economic data and growing concerns regarding the sustainability of current domestic asset prices.

2,016

0

dovish

396

However, a couple of participants noted that the recent oil price decline could also be associated with increasing oil supply rather than softening global demand.

1,996

0

dovish

397

In his view, historical precedents suggested that prolonged periods of taut labor markets were eventually associated with rising inflation.

1,999

1

hawkish

398

The technical measures we are undertaking do not represent a change in the stance of monetary policy, which we continue to implement by adjusting the target range for the federal funds rate.

2,021

2

neutral

399

A few participants argued that maintaining a highly accommodative stance of monetary policy over the medium run would erode the stability of inflation expectations.

1,996

1

hawkish

400

For example, in his monetary policy testimony of July 1992, Chairman Greenspan said, "As I have often noted to this committee, the most important contribution the Federal Reserve can make to encouraging the highest sustainable growth the U.S. economy can deliver over time is to provide a backdrop of reasonably stable prices on average for business and household decisionmaking" (Greenspan, 1992, pp.

1,997

1

hawkish

401

Job growth last month was fairly widespread, although heavy hiring in the construction sector was due partly to efforts to repair damage from the four hurricanes that hit the southeastern states.

2,005

2

neutral

402

In particular, participants judged that communicating the Committee's expectation that short-term interest rates were likely to stay exceptionally low for some time could be useful because it could lead to pricing of longer-term interest rates consistent with the path of monetary policy that policymakers saw as most likely.

2,003

0

dovish

403

Our Congressional mandate is to achieve full employment and price stability in the United States.

2,002

1

hawkish

404

This policy preference was based on expectations of growth in business activity at a pace averaging in the vicinity of the economy's potential, a perception among the members that the risks to such an outlook were more balanced than earlier, and anticipations that under these circumstances inflation would remain constrained.

2,004

2

neutral

405

Since the previous FOMC meeting, spreads on municipal bonds narrowed substantially, on net, moving near levels observed for several years before the pandemic, as investor demand exhibited some recovery over much of the period from earlier weak levels.

2,003

0

dovish

406

These headwinds—which include developments abroad, subdued household formation, and meager productivity growth—could persist for some time.

2,022

0

dovish

407

(4') U** = U* - (1/b) [q - q*] U** = short-run or effective NAIRU However, once productivity growth stabilizes at a higher level, q* will eventually catch up to q, and the disinflationary effect will gradually diminish and then completely disappear.

2,007

2

neutral

408

most survey-based measures of longer-term inflation expectations were little changed, on balance, in recent months.

2,013

2

neutral

409

The Federal Reserve and ECB Framework Reviews The monetary policy framework reviews conducted by the Federal Reserve and the ECB provide another example of monetary policy correlation.

2,007

2

neutral

410

And downward revisions to the longer-run normal unemployment rate in a way suggests that participants are seeing more slack in the economy now than they previously did.

2,013

2

neutral

411

Even so, the growth rate of the ECI did not return to the levels experienced before 2008.

2,003

2

neutral

412

In 2019, sluggish growth abroad and global developments weighed on investment, exports, and manufacturing in the United States,

2,022

0

dovish

413

I believe the current move can be justified in a forward-looking variant of the Taylor Rule, where today's policy depends on the forecast of future output gaps and inflation.

2,003

2

neutral

414

One participant suggested that the economic projections would be more understandable if they were based on a common interest rate path.

2,019

2

neutral

415

Monetary Policy But it is monetary policy--and the Fed's principal monetary lever, the federal funds rate, which is the interest rate on overnight loans of reserves between depository institutions--that earns the Federal Reserve all that ink and airtime.

2,020

2

neutral

416

Although members generally saw little risk that maintaining very low short-term interest rates could raise inflation expectations or create instability in asset markets, they noted that it was important to remain alert to these risks.

2,005

0

dovish