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As I mentioned, once you—once you’re, broadly speaking, in the range of neutral, I think it’s appropriate to be putting aside individual estimates of that and be looking at what the incoming data are telling you about the outlook, updating your estimates of what neutral might be, of what the natural rate of unemployment might be, of the state of the economy, so—and letting that lead you to adjust your outlook and, therefore, your appropriate path for policy. | 2,018 | 2 |
I’m old enough to remember what very high inflation was like. | 2,012 | 2 |
One of the things we’ve learned from our financial crisis and from a series of financial crises in history and around the globe is that, very commonly, when the economy takes a hit and falls into a recession, that productivity doesn’t pick up to pre-recession levels and that there looks like there is a permanent hit to the path of potential output for the economy, which is called “hysteresis.” And I raised the question as to whether or not this might operate in the opposite direction as well. | 2,021 | 2 |
The housing sector has fully recovered from the downturn, supported in part by low mortgage interest rates. | 2,021 | 0 |
You can get to 20, if you wanted to, easily, but labor force participation, the unemployment rate, different age groups of—you know, prime-age labor force participation, in particular, gets a lot of focus, the JOLTS data get a lot of focus. | 2,019 | 2 |
We have not seen wage growth pick up. | 2,020 | 2 |
So we do say that risks to the financial system—we say in our longer-run statement of goals and monetary policy strategy that risks to the financial system that could prevent us from achieving our goals are something that we do take into consideration. | 2,021 | 2 |
An unexpectedly sharp increase in wages or inflation could tell you that you’re reaching those points. | 2,018 | 1 |
And I assure you that my colleagues and I will continue to conduct monetary policy without regard to political considerations. | 2,018 | 2 |
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 |
And so what that means is the Federal Reserve cannot add monetary accommodation by cutting short-term interest rates, the usual approach. | 2,020 | 2 |
We also don’t conduct monetary policy in order to prove our independence. | 2,020 | 2 |
And, and that’s why we have adopted the flexible average inflation-targeting framework. | 2,015 | 0 |
The changes—the financial market changes that you described, particularly the increase in stock prices, the increase in longer-term rates, and the strengthening of the dollar, suggest that many market participants anticipate expansionary fiscal policies that would raise interest rates somewhat in the United States relative to abroad and would cause a strengthening in the dollar. | 2,012 | 0 |
So on the first, the Committee’s forecasts and those of most outside forecasters do show growth running below its longer-run potential this year and next year. | 2,019 | 0 |
In fact, it’s already—it’s already understood, I think, that—that there’s more—even though we’re at 3½ percent unemployment, there’s actually more slack out there, in a sense. | 2,022 | 0 |
Growth in household spending moderated toward the end of last year, | 2,013 | 2 |
So, with this coronavirus arriving, we judged that the—the net effects of this will be to—to have inflation move down even a little bit more. | 2,014 | 0 |
Now, we’ve long expected, as most analysts have, to see some slowing in Chinese growth over time as they rebalance their economy. | 2,021 | 0 |
These are, you know, this is—this is the economy at nearly full employment or in the range—in the neighborhood of full employment. | 2,022 | 1 |
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 |
We think that the economy will need highly accommodative monetary policy and the use of our tools for an extended period. | 2,019 | 0 |
And what we—it looks like we’re seeing a slowdown in the rate of growth. | 2,022 | 0 |
The American economy is very strong and well positioned to handle tighter monetary policy. | 2,016 | 1 |
So there’s been a number of emerging markets—as you know, we’re suffering under the weight of declines in oil prices that are affecting their economic activity. | 2,021 | 2 |
So let me start with the question pertaining to exchange rates. | 2,019 | 2 |
But there’s also a role for monetary policy. | 2,014 | 2 |
We also said we wouldn’t raise rates just in response to very low unemployment, in the absence of inflation. | 2,020 | 0 |
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 |
1 Chair Yellen intended to say that “interest rate differentials globally do tend to induce capital flows that have impacts on exchange rates.” GREG ROBB. | 2,019 | 2 |
I would describe some measures of wage growth as having moved up some. | 2,015 | 2 |
So unemployment has tended to go up much faster for minorities and for others who are—tend to be at the low end of the income spectrum. | 2,021 | 0 |
And we were actually quite concerned that growth was not sufficient to continue to bring the unemployment rate down. | 2,017 | 0 |
with a healthy job market, rising incomes, and upbeat consumer confidence, the fundamentals supporting household spending are solid. | 2,013 | 2 |
And I think, more broadly, monetary policy is also supporting household spending and home buying by keeping the labor market strong, keeping workers’ incomes rising, and keeping consumer confidence at high levels, where it currently is. | 2,019 | 0 |
We have a much more resilient, stronger banking system, and we’re not seeing some worrisome buildup in leverage or credit growth at successive levels.1 So, you know, this is something that the FOMC pays attention to, | 2,015 | 2 |
So, you know, I can’t—all I can tell you is, we’ll be looking at weak global growth. | 2,014 | 0 |
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 |
And we’ve seen significant outflows of capital from those countries, pressures on their exchange rates, and concerns about their performance going forward. | 2,022 | 2 |
In the near term, 12-month measures of PCE inflation are expected to move above 2 percent as the very low readings from early in the pandemic fall out of the calculation and past increases in oil prices pass through to consumer energy prices. | 2,012 | 1 |
The persistence of that into, into inflation over time is just not there. | 2,021 | 0 |
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 |
Core inflation, which excludes energy and food prices, has been running close to 1½ percent. | 2,017 | 0 |
So the FOMC will always, in some sense, trump the projections of forward interest rates, but clearly, because the participants and the people around the table are the same, the projections should give significant information about where the FOMC is likely to go. | 2,013 | 2 |
And I’ll discuss the thinking behind today’s interest rate reduction and then turn to the path forward. | 2,019 | 0 |
Business and household spending are increasing at rates consistent with moderate economic growth, though household spending appears to be rising at a somewhat slower pace than earlier this year. | 2,011 | 1 |
So you’re right, you’re seeing—I, I can’t remember the number, but it might be in the 3s—3, 3½ percent growth for next year. | 2,019 | 2 |
Well, our policy approach doesn’t involve intentionally trying to raise inflation. | 2,020 | 1 |
It would consist of inflation plus—plus productivity growth. | 2,020 | 2 |
But I think that that’s a prudent move, to move in a gradual way to remove Chair Yellen’s Press Conference FINAL accommodation, with unemployment now—and not only, I should say, the unemployment rate, but I think any indicator of labor market performance and tightness that you could look at, whether it’s household perceptions of the availability of jobs, difficulty that firms report in hiring workers, the rate at which workers are quitting their jobs, the rate of job openings, all of these indicators do signal a tight labor market. | 2,011 | 1 |
But in many countries around the Chair Yellen’s Press Conference FINAL world that are important commodity exporters, the decline we’ve seen in oil prices has had a depressing effect on their growth, their trade with us and other trade partners, and caused problems that have had spillovers to the global economy as well. | 2,018 | 0 |
I don’t know that demand for reserves has risen over the past years. | 2,013 | 2 |
As you said, falling oil prices pull down inflation. | 2,017 | 0 |
What I’m telling you is that the stance of monetary policy we have today, we believe, is appropriate. | 2,017 | 2 |
So negative interest rates is something that we looked at during the financial crisis and chose not to do. | 2,019 | 2 |
We have not focused on whether we meet the liftoff test, because we don’t meet the liftoff test now because we’re not at maximum employment. | 2,020 | 0 |
More broadly, however, weaker demand, especially in sectors that have been most affected by the pandemic, has held down consumer prices, and overall, inflation is running well below our 2 percent longer-run objective. | 2,014 | 0 |
And I can only say qualitatively that the Committee will continue to look at the evolution of the outlook, try to assess whether unemployment is making sufficient progress towards our objectives, and, in particular, whether the recovery is still continuing. | 2,018 | 0 |
The Phillips curve has become, according to most estimates, quite flat in the sense that movements in unemployment have only a modest impact on inflation, so we shouldn’t overblow how large that is. | 2,020 | 2 |
So, I think you raise a very important point because, although there is a great deal of market focus on the timing of liftoff, what to matter in thinking about the stance of policy is what the entire path of interest rates will look like. | 2,019 | 2 |
And, as I think all of us—having that expectation and that if the economy continued to progress along the lines that we expected and we continued to see the risks as balanced—do regard it as appropriate to gradually remove accommodation that’s in place by having several interest rate increases this year. | 2,015 | 1 |
And maybe reducing their level of the natural rate of unemployment, which has been the trend. | 2,020 | 1 |
Monetary policy, maximum employment, stable prices—it’s less obvious to me. | 2,014 | 2 |
You know, it says that we will seek to—seek inflation that runs moderately above 2 percent for some time. | 2,019 | 0 |
These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to support the economy until the recovery is complete. | 2,022 | 0 |
For example, the unemployment rate has risen by 0.3 percentage points since March, and new claims for unemployment insurance have moved somewhat higher. | 2,021 | 0 |
And those don’t—those, frankly, don’t carry significant implications in the long run for the—for inflation or for the American economy. | 2,017 | 2 |
In spite of having such slow growth, disappointing productivity growth, we have a labor market that last year generated an average of about 230,000 jobs a month and so far this year has been generating about 180,000 jobs a month. | 2,013 | 1 |
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 |
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 |
It isn’t the kind of inflation that’s spread broadly across the economy. | 2,021 | 1 |
If inflation remains higher during the course of 2022, then we may already have met that test by the time we reach liftoff. | 2,016 | 2 |
When, when you get to—in, in the forecast, all of that, you know, supply and demand sides of the economy adapt. | 2,019 | 2 |
And you know, we haven’t yet—we just touched 2 percent core inflation, to pick one measure—just touched it for a few months, and then we’ve fallen back. | 2,022 | 0 |
To do that you've got to have price stability, and we've got to get back to price stability so that we can have a labor market where people's wages aren't being eaten up by inflation and where we can have a long expansion too. | 2,021 | 1 |
And that’s because of this misalignment between supply and demand. | 2,022 | 2 |
And our plan as we do that is, as those purchases get to that level, we believe we can gradually reduce them, and we believe we can also gradually reduce repo as—as we reach an ample level, as we’re satisfying demand now more from underlying reserves from bill purchases rather than from repo. | 2,011 | 0 |
I would note, by the way, that at the current moment, it doesn’t really matter whether we have one mandate or two, because we’re below our inflation target and we—unemployment is above where we’d like it to be. | 2,016 | 0 |
In coming months, as those earlier declines drop out of the calculation, inflation should move up closer to 2 percent and stabilize around that level over the medium term. | 2,022 | 2 |
So that’s the kind of thinking we’ll be doing, and, again, we’re looking—ultimately, we’re not going to declare victory until we see a series of these, really see convincing evidence, compelling evidence, that inflation is coming down. | 2,013 | 1 |
Many members of the Committee, participants, have said that they think policy should be based on the actual evolution of economic activity and inflation, which tends to be variable over time, and that’s why I say I anticipate it will be data dependent. | 2,012 | 2 |
growth in the far larger part of the services economy, which has led to low unemployment, good job creation, rising wages, that’s kind of the two big pieces of it that you see. | 2,014 | 1 |
We heard anecdotes today in the meeting about firms that might be government contractors that were, you know, not sure about whether the contracts would still be in place come January and making employment decisions based on that. | 2,019 | 2 |
Our current framework for implementing monetary policy is working very well. | 2,021 | 2 |
If you lay the crosscurrents on top of that—concerns about global growth and trade developments—you have the full picture. | 2,021 | 2 |
We’re charged by Congress with trying to pursue maximum employment, and we have taken that very seriously. | 2,022 | 0 |
The asset purchases are about creating some near-term momentum in the economy, trying to strengthen growth and job creation in the near term, and the increases in the federal funds rate target, when they ultimately occur, are about reducing accommodation. | 2,012 | 1 |
Our mandate, sorry, is price inflation. | 2,021 | 1 |
As a further step in enhancing the clarity of our communications, the Committee recently decided to begin publishing information about participants’ assessments of appropriate monetary policy—that is, the path of policy that each participant judges as most likely to foster mandate-consistent outcomes for employment and inflation if the economy evolves as expected. | 2,018 | 2 |
As the factors restraining economic growth are projected to fade further over time, the median rate rises to 3 percent by the end of 2018, close to its longer-run normal level. | 2,017 | 1 |
If you look at the number of job openings compared to the number of unemployed, it’s—we’re, we’re clearly on a path to a very strong labor market with high participation, low unemployment, high employment, wages moving up across the spectrum. | 2,021 | 1 |
And I fully expect it will return to solid growth and a solid labor market as well. | 2,019 | 2 |
The Committee, based on its assessment at each meeting, has felt comfortable saying that, based on its assessment of those factors, it considers that it will be likely appropriate to maintain the current target range for a considerable time after the asset purchase program ends, especially if inflation remains below the 2 percent objective. | 2,016 | 2 |
Inflation has continued to run below our longer-run objective, in part reflecting lower energy prices. | 2,012 | 0 |
So you’re going to have different perspectives from Committee participants about how fast growth will be, how fast the labor market will heal, or how fast—sorry, inflation will move up. | 2,019 | 1 |
We also do see the different measures of slack in the labor market point to different assessments of just what maximum employment is. | 2,021 | 2 |
So you’re talking about the inflation target, basically. | 2,019 | 2 |
What they have had is low unemployment, lots of social problems. | 2,017 | 2 |
And then we’ll look to have that just running in the background and have—and have the interest rates, again, be the active tool of monetary policy. | 2,022 | 2 |
But now, let’s go to your—the part of your question about inflation. | 2,020 | 2 |
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