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Overall consumer prices increased in July and August at about the second-quarter rate. | 2,012 | 1 |
Although the required amount of cumulative tightening may have increased, members noted that an accelerated pace of policy tightening did not appear necessary at this time, as a degree of economic slack apparently remained, productivity growth would probably continue to damp increases in unit labor costs and prices, and inflation would most likely continue to be contained. | 2,018 | 2 |
Participants anticipated that inflation would continue to gradually rise as resource utilization tightened further and as wage pressures became more apparent; several expected that declines in the foreign exchange value of the dollar in recent months would also likely help return inflation to 2 percent over the medium term. | 2,003 | 1 |
Nowhere, however, is the challenge to monetary policymakers greater than in emerging economies around the world. | 2,020 | 2 |
Price inflation had picked up a little but, abstracting from energy, had remained relatively subdued. | 1,996 | 2 |
In the absence of such shocks, and assuming appropriate monetary policy, participants' economic projections generally showed growth picking up to a moderate pace and the unemployment rate declining somewhat next year. | 2,022 | 1 |
Traditionally, these two measures of excess demand move together over the cycle. | 1,997 | 2 |
We can best promote a progressive credit climate by maintaining an environment of low inflation. | 2,003 | 1 |
This lack of congressional momentum could be interpreted as lack of congressional support for inflation targeting, or it could merely reflect a more neutral absence of strong opinions. | 2,020 | 2 |
For all these conceptual uncertainties and measurement problems, a specific numerical inflation target would represent an unhelpful and false precision. | 2,000 | 2 |
M3 growth slowed less than that of M2 in November, in part because of stepped-up issuance of large time deposits as banks reduced their reliance on funding from overseas offices. | 2,017 | 1 |
In the textbook world of Mundell-Fleming, unanticipated monetary ease leads to lower interest rates, a drop in the home currency's value, and a stimulus to net exports. | 2,020 | 0 |
Even so, the growth rate of the ECI did not return to the levels experienced before 2008. | 2,003 | 2 |
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 |
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 |
Measures of inflation compensation based on TIPS fell in response to the soft reading on core inflation in the November CPI release but 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 |
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 |
The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. " | 2,002 | 2 |
Mr. Plosser noted that the Committee could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures. | 2,005 | 1 |
And, by the end of this year, I support having the policy rate at a level above neutral so that it is reducing demand for products and labor, bringing it more in line with supply and thus helping rein in inflation. | 2,000 | 1 |
"4 While this new framework represents a robust evolution in our monetary policy strategy, this strategy is in service to the dual-mandate goals of monetary policy assigned to the Federal Reserve by the Congress—maximum employment and price stability—which remain unchanged.5 Concluding Remarks While economic recovery since the spring collapse has been robust, let us not forget that full economic recovery from the COVID-19 recession has a long way to go. | 2,007 | 0 |
However, in the view of at least some members, recent developments had reduced the unwelcome prospect of substantial additional disinflation. | 2,014 | 2 |
In the current decade, however, the standard deviation of inflation has been relatively stable in Brazil, at around 5 percent, and it has been declining in Mexico, where it is now around 2 percent. | 2,000 | 2 |
Because there is considerable uncertainty about the persistence, breadth, and magnitude of climate-related shocks to the economy, it could be challenging to assess what adjustments to monetary policy are likely to be most effective at keeping the economy operating at potential with maximum employment and price stability.8 We need only look back to the oil price shocks of the 1970s and 1980s to see how difficult it was for monetary policymakers to assess accurately the likely persistence of the effects on inflation and output and the appropriate response. | 2,007 | 2 |
In addition, coming to grips now with the outsized projected growth in entitlement spending in the early years of the next century could have a profound effect on current expectations of stability. | 2,000 | 1 |
When long-term rates rise in response to a cyclical strengthening, it reflects, in large part, the expectation of higher short-term interest rates. | 1,999 | 2 |
We need to avoid expectations rising so much that they become a factor that drives inflation higher. | 2,021 | 1 |
With underlying inflation running below 2 percent for many years and COVID contributing to a further decline, it is important that monetary policy support inflation expectations that are consistent with inflation centered on 2 percent over time. | 2,022 | 0 |
They would account for the effects of higher energy prices on the real disposable income and spending demands of the household sector. | 2,021 | 1 |
Econometric methods were also refined to improve estimation and to accommodate more-complex dynamics in money demand equations. | 2,000 | 2 |
The weakness in labor market conditions remained an important concern to meeting participants, with unemployment expected to remain elevated for some time. | 2,001 | 0 |
Inflation pressures remain muted, and indicators of longer-term inflation expectations are at the lower end of their historic ranges. | 2,018 | 0 |
In the Committee's discussion of monetary policy for the intermeeting period, nearly all members favored keeping the target federal funds rate at 5-1/4 percent at this meeting. | 1,997 | 2 |
They continued to expect that inflation would move up toward the Committee's 2 percent objective over the medium term as the effects of these transitory factors waned and conditions in the labor market improved further. | 2,017 | 2 |
In the Committee's discussion of current and prospective economic conditions, members focused on the disparate forces that continued to shape trends in economic activity, notably the persist- ence of considerable strength in private domestic spending and the damping influences stemming from foreign economic developments. | 1,997 | 2 |
For 1997 the Committee agreed on a tentative basis to set the same ranges as in 1996 for growth of the monetary aggregages and debt, measured from the fourth quarter of 1996 to the fourth quarter of 1997. | 2,002 | 2 |
They noted that economic activity and employment had continued to recover but remained well below their levels at the beginning of the year, and that weaker demand and earlier declines in oil prices had been holding down consumer price inflation. | 1,996 | 0 |
And no, we’re not—we, we have not at all changed our view, and I haven’t changed my view that inflation running above 2 percent, moderately above 2 percent, is a desirable thing. | 2,011 | 0 |
And it may generally take longer still for a policy change to alter the course of inflation. | 1,998 | 2 |
Nevertheless, the role of this consideration in inflation dynamics should not be overlooked or underestimated. | 1,999 | 2 |
Pure bubbles--increases in asset prices that are 100 percent air--are, I suspect, rare. | 2,000 | 2 |
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 |
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 |
She showed there some so-called optimal policy rules that come from trying to get the best possible outcomes from our quantitative econometric models, and what you see, if you look at that, is that the best possible outcomes, assuming perfect certainty, assuming perfect foresight—very unrealistic assumptions—still involve inflation staying quite close to 2 percent. | 2,012 | 2 |
Committee Policy Action In their discussion of monetary policy for the period ahead, Committee members agreed that the stance of monetary policy should not be changed at this meeting. | 2,007 | 2 |
So that’s in the low 20s, and that’s post the May employment report. | 2,013 | 2 |
Over the same period, demand for auto loans reportedly strengthened further at many banks. | 2,012 | 0 |
Weaker demand and significantly lower oil prices were holding down consumer price inflation. | 2,009 | 0 |
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 |
As a result, consistent with the policy implication of Bill's 1970 model, the Federal Reserve (like most other central banks) today uses the overnight interbank rate as the principal operating target of monetary policy. | 2,004 | 2 |
The Committee then turned to a discussion of the economic and financial outlook and the implementation of monetary policy over the intermeeting period ahead. | 2,009 | 2 |
Several participants noted that the unseasonably warm weather of recent months added one more element of uncertainty to the interpretation of incoming data, and that this factor might account for a portion of the recent improvement in indicators of employment and housing. | 2,017 | 2 |
Market-based measures of inflation compensation have also picked up. | 1,999 | 1 |
However, in the past two decades, what constitutes money has been obscured by the introduction of technologies that have facilitated the proliferation of financial products and have altered the empirical relationship between economic activity and what we define as money, and in doing so has inhibited the keying of monetary policy to the control of the measured money stock.1 Another example of ongoing structural change relates to innovations in mortgage finance. | 2,005 | 2 |
Accelerating productivity poses a significant complication for economic forecasting. | 2,004 | 0 |
However, given the good pace of economic expansion since then, it would stretch credulity to believe that capacity growth has accelerated at a sufficient pace to produce a large degree of slack at this moment. | 2,005 | 1 |
But first, please allow me to offer a few remarks on the economic outlook and Federal Reserve monetary policy. | 2,000 | 2 |
Wage growth is not—there are many factors that affect it—it’s not definitive in any sense in determining our policy, but it does have a bearing on the inflation outlook. | 2,021 | 2 |
In contrast, a few participants cautioned that, despite increases in market-based measures of inflation compensation in recent months and the stabilization of some survey measures of inflation expectations, the levels of these indicators remained too low to be consistent with the Committee's 2 percent inflation objective. | 2,018 | 0 |
And I'm pleased to have the opportunity to share with you, the students of South Dakota State University (SDSU), my experience as a member of the Federal Reserve Board of Governors and my outlook for the U.S. economy.1 Today I will speak to you about my outlook for the U.S. economy and what the Federal Reserve has been doing to support economic activity during the COVID-19 pandemic recovery. | 1,998 | 2 |
What policy options exist to deal with the U.S. current account deficit? | 2,007 | 1 |
After the stock-market decline that began in March 2000, new capital investment and thus the demand for financing waned around the world. | 2,007 | 1 |
Nevertheless, most participants agreed that, although the level of inventories of unsold homes that homebuilders desired was uncertain, the correction of the housing sector was likely to continue to weigh heavily on economic activity through most of this year--somewhat longer than previously expected. | 2,006 | 2 |
While numerous contacts reported generally disappointing holiday sales in an environment of atypically large and widespread discounting, a surge in motor vehicle sales in December fostered by aggressive sales incentives and some pickup in retail sales late in the holiday season helped to sustain moderate overall growth in consumer spending through the year-end. | 2,002 | 2 |
Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road--either too much inflation, financial instability, or both. | 2,019 | 1 |
Productivity accelerated. | 2,005 | 0 |
However, several participants pointed out that the 3-month change in that index had firmed recently, signaling some improvement in the inflation outlook. | 2,008 | 2 |
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 |
From a policy perspective, a difficulty with all these measures is that they reflect expectations of headline inflation rather than the core inflation measures usually emphasized in the monetary policy context. | 2,021 | 2 |
January 13, 2021 Full Employment in the New Monetary Policy Framework Governor Lael Brainard At the Inaugural Mike McCracken Lecture on Full Employment Sponsored by the Canadian Association for Business Economics (via webcast) Share I want to thank the Canadian Association for Business Economics for inviting me to join you today, particularly president Bonnie Lemcke and past president Armine Yalnizyan. | 2,004 | 2 |
Admittedly, some of the wage increases is being eaten away by inflation. | 2,019 | 1 |
And what is the risk that, in taking such steps, a central bank would be seen by investors as taking on partial responsibility for asset prices? | 2,000 | 2 |
Participants' Views on Current Conditions and the Economic Outlook In 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 of output growth, the unemployment rate, and inflation for each year from 2011 through 2013 and over the longer run. | 1,997 | 2 |
Participants discussed their assessments of risks to financial stability, particularly in light of the Committee's highly accommodative stance of monetary policy. | 1,998 | 0 |
What implications do these results have for our broader understanding and for the practice of monetary policy? | 2,022 | 2 |
Following the GFC, it took more than eight years for employment and inflation to return to similar mandate-consistent levels. | 1,996 | 2 |
However, this shortfall partly reflected the earlier declines in energy prices and decreasing prices of non-energy imports, and some participants pointed out that, by some measures, the most recent monthly inflation readings had firmed a bit. | 1,998 | 0 |
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 |
Greater rates of productivity growth in the United States, compared with still-subdued rates abroad, have apparently engendered comparable differences in risk-adjusted expected rates of return and hence in the demand for U.S.-based investment assets. | 1,999 | 0 |
Mortgage rates, corporate bond rates, and other yields and asset prices moved in sympathy, with important effects on the cost of borrowing and hence, presumably, on aggregate demand. | 2,021 | 1 |
Once this process is completed, however, we might expect consumer price inflation to move into better alignment with long-run expectations and thus settle in around 2 percent. | 2,017 | 2 |
To the extent that the combination of a low neutral rate, a flat Phillips curve, and low underlying inflation may lead financial imbalances to become more tightly linked to the business cycle, it is important to use tools other than monetary policy to temper the financial cycle. | 2,007 | 2 |
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 |
Higher productivity is unambiguously good. | 2,021 | 2 |
Many participants commented that measures of short-term inflation expectations were elevated or that far-forward measures of inflation compensation were near the upper edge of their historical range. | 2,002 | 1 |
Risks to the inflation projection also were seen as balanced. | 2,018 | 2 |
In view of the most recent information on the economy, members agreed that it was appropriate for the post-meeting statement to characterize economic growth as apparently continuing to moderate. | 2,008 | 2 |
But before I comment on productivity, I'd like to begin with a review of recent economic developments. | 2,021 | 2 |
In addition, U.S. inflation remains muted. | 2,000 | 0 |
But in our new century, the simple notion of price has turned decidedly ambiguous. | 2,000 | 2 |
In a nutshell, I believe that the factors of globalization, deregulation, and financial innovation, arising partly in response to episodes of high inflation, have effectively eroded the central bank monopoly on the provision of monetary services and have enhanced global competition among currencies. | 2,020 | 2 |
While the absence of increasing price inflation was a welcome development, members were concerned that the break with historical patterns might not persist. | 2,006 | 1 |
This secular decline in term premiums since 1990 appears to be correlated with the decline in long-run inflation uncertainty and in short-term interest rate uncertainty. | 1,999 | 0 |
Financial markets seem to think the same—5-year breakeven inflation expectations are around 2.5 percent, and 5-year, 5-year-forward measures are around 2 percent, when adjusted for the difference between CPI (consumer price index) and PCE (personal consumption expenditures) inflation rates.6 Hence, markets do not believe the current factors pushing up inflation will last for long. | 2,005 | 2 |
This monetary expansion could generate domestic inflation unless it is sterilized with other open market sales of securities--and the mere scale of present and expected future debt stocks may make continued sterilization impossible. | 2,006 | 1 |
Nonetheless, the Committee judged that some inflation risks remained. | 2,021 | 1 |
However, with monetary policy assumed to remain highly accommodative, the staff continued to anticipate that real GDP growth would outpace that of potential over much of this period, leading to a decline in the unemployment rate to historically low levels. | 2,008 | 0 |
We need to remember that in decades past it was believed that monetary policy was most effective when it was least transparent. | 2,021 | 2 |
In short, rising commodity prices are a better signal of strengthening economic activity than of inflation at the consumer level. | 2,021 | 1 |
Some members expressed concern about the longer-run prospects for large federal deficits and their implications for the future performance of the economy. | 2,013 | 0 |
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