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831
Although the unemployment rate is at a 50-year low, wages are rising broadly in line with productivity growth and underlying inflation.
1,997
0
dovish
832
If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings.
2,015
1
hawkish
833
The members also agreed on the desirability of retaining the assessment that the risks with regard to the outlook for economic growth were balanced.
2,006
2
neutral
834
Total nonfarm payroll employment increased at a solid pace in October and November, and the unemployment rate declined, reaching 4.
2,013
1
hawkish
835
The staff forecast prepared for this meeting suggested that economic activity likely would start to turn up early in 2002 as inventory liquidation tapered off, and would gather strength only gradually.
2,019
2
neutral
836
The faster pace of real GDP growth was expected to be supported by an easing in the restraint from changes in fiscal policy, increases in consumer and business confidence, further improvements in credit availability and financial conditions, and a pickup in the rate of foreign economic growth.
2,021
1
hawkish
837
And similar, sometimes even sharper, trajectories of house prices have been witnessed in some economies in which the central banks said they were paying more attention to asset prices.
1,998
2
neutral
838
In furtherance of these objectives, the Committee at its meeting in July reaffirmed the ranges it had established in January for growth of M2 and M3 of 1 to 5 percent and 2 to 6 percent respectively, measured from the fourth quarter of 1995 to the fourth quarter of 1996.
2,017
2
neutral
839
By reducing our scope to support the economy by cutting interest rates, the lower bound increases downward risks to employment and inflation.22 To counter these risks, we are prepared to use our full range of tools to support the economy.
2,013
0
dovish
840
At the same time, however, the staff increased the growth rate forecast for 2006 to reflect the boost to economic activity from the rebuilding effort.
2,021
1
hawkish
841
Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances at 0.
1,996
2
neutral
842
Participants expected economic activity to contract sharply in the fourth quarter of 2008 and in early 2009.
2,008
0
dovish
843
We’re charged by Congress with trying to pursue maximum employment, and we have taken that very seriously.
2,022
0
dovish
844
And, at a high level, yes, I would say, and I’ve said before, that it’s really fiscal policy that is more powerful and that has much more to do with—fiscal policy can do those things that will increase the longer-run growth rate of the United States by improving productivity and labor force September 18, 2019 participation and the skills and aptitudes of workers.
2,011
2
neutral
845
In contrast, CRE loan growth at banks was weak in July and August, likely partly driven by the recovery of CMBS markets.
2,018
2
neutral
846
Looking ahead, an abatement or reversal of some of the temporary factors reducing prices was likely to raise measured inflation.
2,019
1
hawkish
847
We had a 10 percent unemployment rate, and our congressional mandate is maximum employment and price stability.
2,015
0
dovish
848
But now, let’s go to your—the part of your question about inflation.
2,020
2
neutral
849
Still, most members projected that over the next couple of years, the unemployment rate would remain quite elevated and the level of inflation would remain below rates consistent over the longer run with the Federal Reserve's objectives.
2,002
0
dovish
850
However, some participants indicated that underlying inflation remained subdued
2,008
0
dovish
852
Here's a wonderful game: Assume that the ECB governing council or the Bank of England's Monetary Policy Committee replaced the Federal Open Market Committee and made monetary policy in the United States--or vice versa.
1,999
2
neutral
853
Because current inflation is affected by inflation expectations, the smaller increase in expected inflation will lead to a smaller increase in actual inflation as well.
2,007
1
hawkish
854
In conjunction with the FOMC meeting in April, all meeting participants (Federal Reserve Board members and Reserve Bank presidents) provided annual projections for economic growth, the unemployment rate, and inflation for the period 2008 through 2010.
2,011
2
neutral
855
another is the growing literature on the interaction of learning, inflation dynamics, and monetary policy.
2,001
2
neutral
856
By fostering increased interactions among central banks, academics, and the public in many different countries, globalization has helped spread a common culture that stresses the benefits of achieving price stability.
2,013
1
hawkish
858
these participants noted the risk that such cautious attitudes toward hiring could slow the pace at which the unemployment rate normalized.
2,014
2
neutral
859
These productivity gains result from many forces, including business investment that has increased the amount and quality of capital available to the workforce, business process innovations, and the growth of innovative, research-intensive industries such as information technology and biotechnology.
2,001
2
neutral
860
This was before inflation really was under control, but, you know, it’s very interesting to look at the history.
2,022
2
neutral
862
For example, if financial market participants thought that the Federal Reserve were not dedicated to maintaining long-run price stability, they would be less willing to hold dollar-denominated assets and the resulting decline in the exchange value of the dollar would tend to add to inflationary pressures.
2,004
1
hawkish
863
There are also asymmetric price effects from cost shocks—prices go up very quickly but often tend to come down more slowly, as consumers slowly learn that the bottlenecks have gone away.
2,004
1
hawkish
864
The second requirement contributes to the first and also to smoothing fluctuations in output around full employment.
2,017
0
dovish
865
Some business executives reportedly believed that, with aggregate demand expanding robustly and the lower foreign exchange value of the dollar putting upward pressure on import prices, a degree of "pricing power" had returned.
2,018
1
hawkish
866
The implication is that trend productivity and, ultimately, potential growth are lower than expected.
2,004
0
dovish
867
However, growth of mortgage loans on banks' books slowed somewhat in the first half of this year.
2,007
0
dovish
868
In the United States, Congress has set the objectives for monetary policy in the Federal Reserve Act, as amended in 1977.
2,022
2
neutral
869
Most Committee members, while acknowledging the deficiencies of structural models, viewed them as useful in their efforts to understand how the inflation process was changing and also as input to inflation forecasts.
2,021
2
neutral
871
The available data for October suggested that the contribution of the change in net exports to real GDP growth in the fourth quarter would be much less negative than the drag of nearly 2 percentage points in the third quarter.
2,009
2
neutral
872
Available information suggested that economic activity in the major foreign industrial countries continued to advance, but at an uneven pace; in Germany, activity rebounded from the contraction in the first quarter, while in Japan a considerable slowing of growth had occurred in the second quarter after very rapid expansion in the first quarter.
2,018
2
neutral
873
subsequently moved up against the backdrop of an improving global growth outlook, higher commodity prices, depreciation of the dollar, and the stronger-than-expected reading on core inflation in the December CPI release.
2,006
1
hawkish
874
Despite the progress to date and the signs of acceleration in the recovery, employment is still considerably short of where it was when the pandemic disrupted the economy and it is well below where it should be, considering the pre-pandemic trend.
1,999
0
dovish
875
Although in a number of sectors of the economy the imbalances between demand and supply—including labor supply—are substantial, I do continue to judge that these imbalances are likely to dissipate over time as the labor market and global supply chains eventually adjust and, importantly, do so without putting persistent upward pressure on price inflation and wage gains adjusted for productivity.
2,006
2
neutral
876
Jorgenson, Ho, and Stiroh use a similar methodology and find a range from a little less than 1-1/2 percent to about 3 percent with a central tendency of around 2-1/4 percent.5 These estimates are clearly plausible, but history does raise some warning flags concerning the length of time that productivity growth continues elevated.
2,004
0
dovish
877
With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.
1,999
2
neutral
878
It is precisely because none of these preconditions hold that monetary policy is so difficult and principles are needed to guide its implementation.
1,999
2
neutral
879
As U.S. business investment has recently begun a cyclical recovery while residential investment has remained strong, the domestic saving shortfall has continued to widen, implying a rise in the current account deficit and increasing dependence of the United States on capital inflows.9 According to the story I have sketched thus far, events outside U.S. borders--such as the financial crises that induced emerging-market countries to switch from being international borrowers to international lenders--have played an important role in the evolution of the U.S. current account deficit, with transmission occurring primarily through endogenous changes in equity values, house prices, real interest rates, and the exchange value of the dollar.
2,022
1
hawkish
880
Misconceptions about Inflation Targeting I would like to turn now, briefly, to comment on a few key misconceptions about inflation targeting that have gained some currency in the public debate.
2,020
2
neutral
881
In the housing sector, demand had continued to display appreciable strength in recent months in association with relatively moderate mortgage rates and very positive consumer assessments of homebuying conditions.
2,009
2
neutral
882
The cutback in residential construction has directly reduced the annual rate of U.S. economic growth about 3/4 percentage point on average over the past year and a half.
2,004
0
dovish
883
In discussing the increases in U. S. longer-term interest rates that occurred in the wake of the June FOMC meeting and the associated press conference, meeting participants pointed to heightened financial market uncertainty about the path of monetary policy and a shift of market expectations toward less policy accommodation.
2,001
1
hawkish
884
May 13, 2021 The Economic Outlook and Monetary Policy Governor Christopher J. Waller At The Global Interdependence Center's 39th Annual Monetary and Trade Conference, The LeBow College of Business, Drexel University, Philadelphia, Pennsylvania (via webcast) Share Watch Live Thank you, Kathleen, and thank you, George and the Global Interdependence Center, for the invitation to speak to you this afternoon.
1,999
2
neutral
885
For instance, monetary policymakers must accurately assess how disasters such as hurricanes, wildfires, and flooding affect labor markets, household and business spending, output, and prices.7 In deciding whether to alter monetary policy or, instead, to "look through" such shocks, policymakers need to assess the likely persistence of the effects and how widespread they are.
2,020
2
neutral
886
Broad stock price indexes rose, on net, over the intermeeting period, as investors responded to strong second-quarter earnings reports and indications that the economy may be stabilizing.
1,999
2
neutral
887
Indicators for China in July pointed to only a modest slowing of output growth from its torrid pace in the first half of the year.
2,016
2
neutral
888
Nonetheless, the risks to the forecast for real GDP growth were viewed as tilted a little to the downside, especially because the economy was not well positioned to withstand adverse shocks while the target for the federal funds rate was at its effective lower bound.
1,996
0
dovish
889
In the past, a reasonable goal might have been to maintain a zero deficit in our on-budget accounts--those accounts that exclude the Social Security and Medicare surplus--and to begin a serious discussion of reforms to Social Security and Medicare to bring them closer into actuarial balance.
2,021
2
neutral
890
Crude oil prices continued to rise, reaching record levels in nominal terms over the intermeeting period.
2,016
1
hawkish
891
It will take time for the cumulative effect of tighter monetary policy to work through the economy broadly and to bring inflation down.
2,000
1
hawkish
892
The staff forecast for total PCE price inflation in 2018 was revised up slightly, mainly because of a faster-than-expected increase in consumer energy prices in the second half.
2,019
1
hawkish
893
Of course, the cost of this critical stabilization was the high unemployment and lost output associated with the sharp 1981-82 recession.
2,002
0
dovish
895
After precipitous drops in March and April, employment rose strongly in May and June as many people returned to work from temporary layoffs.
2,019
1
hawkish
896
We’re also, as part of our review, looking at potential innovations, changes to the way we think about things, changes to the framework that would lead us—that would be more supportive of achieving inflation on a 2 percent—on a symmetric 2 percent basis over time.
2,022
2
neutral
897
Eventually, financial markets may develop the instruments and associated analytical techniques for unearthing these implicit changes in the general price level with some precision.
1,996
2
neutral
898
But you didn’t under the merely adverse scenario, which featured an inflation shock followed by a quick rise in short-term rates.
2,014
1
hawkish
899
Term premiums could be lower when inflation expectations are well anchored or the macroeconomy is less volatile.
2,005
2
neutral
900
The boom was fueled by a sustained acceleration of productivity and an accompanying rise in corporate profits--fundamental changes that justified a major rise in equity prices.
2,021
0
dovish
901
By 2009, the forecasts for both the headline and core PCE price indexes showed inflation receding from its 2008 level, in line with the previous forecasts.
2,022
2
neutral
902
forecasts of more moderate growth in aggregate demand at a pace around potential output had substantially reduced the odds on rising inflation, the risks still were pointed in that direction on balance.
2,014
2
neutral
903
And inflation is well above target.
2,020
1
hawkish
904
Using more-conventional specifications of Phillips curves, the research at the Federal Reserve Board (Ihrig and others, 2007) and the OECD (Pain, Koske, and Sollie, 2006), as well as Ball (2006), finds that foreign output gaps are not important determinants of domestic inflation.
2,005
2
neutral
905
Here is where unit labor costs, or specifically the relationship between productivity growth and wage increases, would come into play.
1,999
2
neutral
906
And part of that just is the effect of lower interest rates.
2,011
0
dovish
907
Moreover, investing in EMEs has become more attractive as many EMEs have improved their macroeconomic policies and institutional frameworks over recent decades; growth differentials may partly be reflecting these improvements.
2,006
2
neutral
908
Median inflation in the nine countries likewise declined, averaging 9-1/2 percent in 1995-99 and 5 percent in 2000-04.Return to text 4.
2,017
2
neutral
909
In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
1,997
0
dovish
910
Again, that’s not a forecast, I’ve made a hypothesis, which would imply slower improvement in unemployment.
2,019
0
dovish
911
Moreover, a change in the ranges might be misinterpreted as a signal of greater reliance on the broad monetary aggregates in the formulation and conduct of monetary policy.
2,018
2
neutral
912
Despite some recent turbulence, owing in part to geopolitical events, stock prices have logged robust gains over the past 3-1/2 years, and broad equity indices have now retraced most of the ground lost between 2000 and 2002.
2,021
2
neutral
913
In light of increased uncertainties and muted inflation pressures, we now emphasize that the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion with a strong labor market and inflation near its 2 percent objective.
2,013
0
dovish
914
At the same time, the incentive to take advantage of increasingly efficient high-tech equipment and software typically available at declining prices would continue to provide an important underpinning for further large gains in investment spending, with favorable implications for continued rapid growth in productivity.
2,021
2
neutral
915
Fourth and finally, the statement codifies the key lesson from the Global Financial Crisis—that financial stability is necessary for the achievement of our statutory goals of maximum employment and price stability.
2,008
2
neutral
916
The “extended period” language is conditioned on exactly those same points: “Extended period” is conditioned on resource slack, on subdued inflation, and on stable inflation expectations.
2,015
0
dovish
917
And obviously there are benefits from a strong economy to every household in the economy, including savers, from having a better job market and a more secure economy.
2,011
2
neutral
918
Monetary policy seeks to buffer the economy from unexpected adverse disruptions, or "shocks."
1,997
2
neutral
919
On this path, unemployment would decline modestly below current estimates of the natural rate and remain there for some time.
2,017
1
hawkish
920
I will then turn to three challenges our dynamic economy is posing for policy at present: First, what would the consequences of a sharp rise in the price of oil be for the U.S. economy?
2,001
1
hawkish
921
This linkage establishes one important connection between the FOMC's target funds rate and interest rates more broadly.
2,020
2
neutral
922
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"—not "deviations.
2,006
0
dovish
923
In these circumstances, I believe, it is appropriate to put greater weight on incoming data to determine whether the stance of monetary policy should be changed.
2,020
2
neutral
925
Nonetheless, the members also noted that the rise in compensation increases had been damped and that there continued to be few indications of accelerating price inflation in the statistical and anecdotal information available at this time
2,021
2
neutral
926
However, those concerns generally were seen as outweighed by the benefit of avoiding tying the Committee's decision too closely to the unemployment rate alone,
2,008
2
neutral
927
Participants also generally agreed that the recent data had not led them to significantly change their outlooks for the most likely rates of economic growth and inflation in coming quarters.
2,004
2
neutral
928
It can be argued that this meant getting the economy back to its 2019 state with very low unemployment and inflation near 2 percent.
2,020
2
neutral
929
The remarkable coming together of technologies that we label IT has allowed us to move beyond efficiency gains in routine manual tasks to achieve new levels of productivity in routine information-processing tasks that previously depended upon other facets of human input--computing, sorting and retrieving information, and acting on pieces of information.
2,007
2
neutral
930
The labor market improved in August, and the unemployment rate edged down to 5.
2,008
1
hawkish
931
The staff's June projections for the unemployment rate, real GDP growth, and inflation over the next few years were all a little lower, on balance, than those in its March forecast.
2,021
2
neutral
932
Proponents of this strategy sometimes describe this approach as reducing inflation cycle-to-cycle or describe the economy as being one recession from price stability.
2,000
1
hawkish
933
A few participants judged that the expectations regarding the path of the federal funds rate implied by prices in financial markets were currently suggesting greater provision of accommodation at coming meetings than they saw as appropriate and that it might become necessary for the Committee to seek a better alignment of market expectations regarding the policy rate path with policymakers' own expectations for that path.
2,020
0
dovish
934
Because, under a simple feedback policy, private-sector expectations are likely to be broadly consistent with the central bank's plans, the effectiveness of monetary policy would be enhanced as well.
2,007
2
neutral
935
In Japan, private consumption rebounded strongly, and private investment and net exports continued to boost growth.
2,006
2
neutral
936
So, you know, as I mentioned, the Committee acutely feels its obligation to move to make sure that we restore price stability and is determined to use its tools to do so.
2,014
1
hawkish