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While labor markets were anticipated to remain tight in the near term, participants expected labor demand and supply to come into better balance over time, helping to ease upward pressure on wages and prices. | 2,002 | 1 |
Furthermore, in the latest report, FOMC participants indicated that the current degree of uncertainty about GDP growth is even higher than the typical level of uncertainty over the past two decades. | 1,998 | 2 |
Monetary policy decisions are judgment calls, informed by forecasts and discussions about how the economy is likely to evolve, alternative possibilities, and potential responses to policy actions. | 2,021 | 2 |
First, such a development would ultimately call for an upward revision to the targets for money growth, so that the money growth targets would remain consistent with an unchanged target for the inflation rate. | 2,001 | 0 |
To date, the spillover from the surge in oil prices has been modest. | 2,021 | 1 |
This allows the economy to operate at a higher utilization rate without inflationary consequences, at least until the higher productivity is fully anticipated in wage bargaining or until productivity growth stops accelerating. | 2,021 | 2 |
At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive: "Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. | 2,009 | 0 |
So, we are taking account of international developments, including prospects for growth in our trade partners, in making the forecast we have here. | 2,014 | 2 |
This modal projection for the path of the unemployment rate is, according to the Atlanta Fed jobs calculator, consistent with a rebound in labor force participation to its estimated demographic trend and is also consistent with cumulative employment gains this year and next that, by the end of 2022, eliminate the 7 million "employment gap" relative to the previous cycle peak I mentioned earlier.5 As is the case for GDP growth and the unemployment rate, my projections for headline and core PCE (personal consumption expenditures) inflation are also similar to the paths of the SEP median of modal projections for these variables. | 2,006 | 2 |
Indeed, stock prices did not collapse in 1929 but only began to plummet when the depth of the general economic decline became apparent. | 2,005 | 0 |
For example, the evidence suggests that changes in the demographic composition of the labor force affect NAIRU and it is also likely that government programs, including unemployment compensation and welfare, also affect NAIRU. | 1,997 | 2 |
The several extensions of emergency unemployment insurance benefits appeared to have raised the measured unemployment rate, relative to levels recorded in past downturns, by encouraging some who have lost their jobs to remain in the labor force. | 1,997 | 0 |
Given stable prices, savers and investors have more confidence about the ultimate value of their investments. | 1,998 | 1 |
But the advent of the war has led to a significant hit to real incomes from large price increases in energy and other commodities in some of the most severely affected economies. | 1,997 | 1 |
Household expenditures on new homes were likewise at an elevated level, although members reported weakness in some price segments and geographic areas of the housing market. | 2,001 | 1 |
Another participant mentioned, however, that recent sluggish growth of the monetary aggregates suggested that the stance of policy was not overly accommodative. | 2,002 | 0 |
In this environment, America's prospects for economic growth will greatly depend on our capacity to develop and to apply new technology--a quest that inevitably will entail some risk-taking. | 2,019 | 2 |
While anecdotal reports suggested that softening was confined to only a few areas, the delayed effects of the drop in stock market prices and forecasts of slower employment and income growth suggested some moderation in housing activity at some point. | 2,017 | 0 |
Potentially, waiting could require more disruptive policy tightening actions later and could risk the credibility of the System's anti-inflation policy. | 2,001 | 1 |
Nevertheless, a number of participants cited notable declines in survey measures of consumer confidence since the onset of financial turbulence in mid-summer, along with sharply higher oil prices, declines in house prices, and tighter underwriting standards for home equity loans and some types of consumer loans, as factors likely to restrain consumer spending going forward. | 2,006 | 0 |
Money versus Interest Rates For most of the post-World War II period, monetary economists have vigorously debated whether the Fed should target money or interest rates in setting policy. | 1,997 | 2 |
Participants observed that both overall inflation and inflation for items other than food and energy remained near 2 percent on a 12-month basis. | 1,997 | 2 |
A surge in nonfarm business inventory investment accounted for a substantial portion of the acceleration in output in the first quarter, and an anticipated moderation in the accumulation of inventories was an important element in forecasts of greatly reduced economic growth in the current quarter. | 2,003 | 0 |
The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. | 2,001 | 0 |
As long as the Federal Reserve is required to set and report ranges for money and debt growth, it should update them as appropriate. | 2,013 | 2 |
While these studies allow for differences in the weighting of price indexes across different income groups, they rely on the same elementary price indexes for subcategories of goods and services. | 2,017 | 2 |
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 |
Indeed, I would argue that over the past eight years, the framework served us well and supported the Federal Reserve's efforts after the Global Financial Crisis (GFC) first to achieve and then, for several years, to sustain—until cut short this spring by the COVID-19 pandemic—the operation of the economy at or close to both our statutorily assigned goals of maximum employment and price stability in what became the longest economic expansion in U.S. history. | 2,006 | 1 |
Clearly, businesses regarded such investments as highly profitable, and they appeared to be leading to gains in productivity that in turn were helping to offset rising compensation and to maintain profit margins in highly competitive markets. | 2,022 | 2 |
Many foreign central banks tightened monetary policy to address high inflation. | 2,013 | 1 |
August 26, 2022 Monetary Policy and Price Stability Chair Jerome H. Powell At “Reassessing Constraints on the Economy and Policy,†an economic policy symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming Share Watch Live Thank you for the opportunity to speak here today. | 2,022 | 2 |
Today, the Federal Reserve's duties fall into four general areas--some that would have been familiar to the central bankers in the Fed's early years and some that would have been unfamiliar: maintaining the stability of the financial system and containing systemic risk that may arise in financial markets supervising and regulating banking organizations to ensure the safety and soundness of the nation's banking and financial system and to protect consumers from harm in their use of credit and banking services playing a major role in operating and overseeing the nation's payment system, including providing certain financial services to financial institutions, the U.S. government, and foreign official institutions conducting monetary policy in pursuit of stable prices and maximum sustainable employment We have an all-too-recent example of the Fed as a source of financial stability in its response to the financial aftermath of the terrorist attacks of September 11, 2001, which occurred just before I joined the Board in December 2001. | 2,019 | 2 |
The staff expected the 12-month change in PCE prices to gradually move down in coming months, reflecting, importantly, the fading of base effects along with smaller expected monthly price increases, but PCE price inflation was forecast to still be well above 2 percent at the end of this year. | 1,998 | 2 |
Several participants raised concerns regarding the longer-run effects of the pandemic, including how it could lead to a restructuring in some sectors of the economy that could slow employment growth or could accelerate technological disruption that was likely limiting the pricing power of firms. | 2,014 | 0 |
Nonetheless, the leveling off in that disturbing trend is an encouraging sign of what we can achieve if we can maintain strong and flexible labor markets accompanied by low inflation. | 2,003 | 1 |
Indicators of longer-term inflation expectations were little changed on balance. | 2,014 | 2 |
Homebuilding was forecast to decline somewhat but to stabilize at a relatively high level in the context of continued income growth and the generally favorable cash-flow affordability of home ownership. | 2,001 | 2 |
Headline stock price indexes in the AFEs generally ended the period higher, whereas bank stocks in Europe declined. | 2,019 | 2 |
Petroleum prices have been under particular pressure, reflecting not only stronger demand but also risks that supplies could be constrained by terrorism or political disruption. | 2,002 | 1 |
The external sector was expected to exert a small restraining influence on economic activity over the projection period. | 2,021 | 0 |
As a consequence, a sustainable, non-inflationary expansion is likely to involve some moderation in the growth of economic activity to a rate more consistent with the expansion of the nation’s underlying productive capacity. | 2,017 | 1 |
The monitoring range for growth of total domestic nonfinancial debt was set at 3 to 7 percent for the year. | 2,012 | 2 |
If a range is selected, questions will arise about the differing implications of movements of inflation inside the range and outside the range and, in the absence of explicitly identifying the mid-point as the target, about where within the range policymakers would prefer inflation to gravitate. | 2,001 | 2 |
It was not only capital spending and equity prices that seemed to overshoot in the late 1990s; credit was provided with undue optimism about prospects for repayment. | 2,000 | 2 |
Inflation is a significant challenge for everyone, but it hits lower- and moderate-income people the hardest, since they spend a larger share of their incomes on necessities and often have less savings to fall back on. | 2,005 | 1 |
This action was taken against the backdrop of heightened concerns and uncertainty created by the recent terrorist attacks and their potentially adverse effects on asset prices and the performance of the economy. | 2,015 | 0 |
Real GDP growth was expected to step down in 2022 and 2023 but still outpace that of potential over this period, leading to a decline in the unemployment rate to historically low levels, as monetary policy was assumed to remain highly accommodative. | 2,008 | 0 |
The guidance on asset purchases, introduced in December, commits us to increasing our holdings of securities at least at the current pace until substantial further progress has been made toward the Committee's maximum-employment and price-stability goals. | 1,997 | 0 |
The strong support from monetary policy, together with fiscal stimulus, should turn the K-shaped recovery into a broad-based and inclusive recovery that delivers full employment, as Mike McCracken would have wished. | 2,001 | 0 |
The recent information on inflation was seen as disappointing. | 2,011 | 2 |
But, again underscoring an earlier point, this tightness of the labor market has not manifested itself in ongoing escalation of wage inflation. | 2,004 | 1 |
Or the 1990s could be used as an illustration of how monetary policy could lower inflation, with concomitant gains in terms of full employment and long-term economic growth. | 2,002 | 1 |
Foreign economic growth declined in the second quarter. | 2,016 | 2 |
Both total and core inflation were projected to move up slightly next year, as the low readings early this year were expected to be transitory, but nevertheless to continue to run below 2 percent. | 2,011 | 0 |
Staff Review of the Financial Situation On balance, financial conditions in the United States remained supportive of growth in economic activity and employment: The expected path of the federal funds rate was slightly lower in the long run, yields on longer-term Treasury securities moved down modestly, equity prices rose, corporate bond spreads narrowed, and the foreign exchange value of the dollar was little changed. | 2,001 | 0 |
Although the unemployment rate has declined somewhat since the summer, it remains elevated. | 2,017 | 0 |
But I continue to believe that the underlying rate inflation in the U.S. economy is hovering close to our 2 percent longer-run objective and, thus, that the unwelcome surge in inflation this year, once these relative price adjustments are complete and bottlenecks have unclogged, will in the end prove to be largely transitory. | 2,000 | 2 |
Some Reasons for the Decline in Far-Forward Rates Why have the far-forward rates implied by the term structure of interest rates declined in recent years? | 2,022 | 2 |
Moreover, we should recognize that these disinflationary effects could dissipate or even be reversed in coming years. | 2,021 | 0 |
Measures of forward inflation compensation based on Treasury Inflation-Protected Securities and inflation swaps fell further. | 2,006 | 0 |
Inflation Targeting and Central Bank Behavior," Federal Reserve Bank of New York, mimeo. | 2,021 | 2 |
Mr. Kocherlakota dissented because, in his view, the new forward guidance in the fifth paragraph of the statement would weaken the credibility of the Committee's commitment to its inflation goal by failing to communicate purposeful steps to more rapidly increase inflation to the 2 percent target and by suggesting that the Committee views inflation persistently below 2 percent as an acceptable outcome. | 2,005 | 0 |
This is the scenario from which we draw the lesson that timely, typically preemptive, policy restraint to avoid the excesses of a boom results in longer expansions and avoids unnecessary fluctuations in both output and inflation. | 2,020 | 1 |
However, it is not yet clear how high we will need to raise the federal funds rate and how much time will pass before we begin to see inflation moving back down in a consistent and lasting way. | 2,004 | 1 |
The Committee also noted that output had continued to expand at a solid pace, new hiring had appeared to pick up, and although incoming data on inflation showed that it had moved somewhat higher, longer-term inflation expectations had remained well contained. | 2,016 | 1 |
The staff forecast prepared for this meeting suggested that the expansion in economic activity would slow in coming quarters to a pace somewhat above that of the economy's estimated potential and would moderate a bit further in 1998. | 2,019 | 1 |
In light of these significant policy actions, the risks to growth were now thought to be more closely balanced by the risks to inflation. | 2,003 | 2 |
Alternatively, monetary policy could convert the temporary disinflationary effect into a permanent one. | 2,007 | 1 |
Participants agreed that the labor market had remained strong over the intermeeting period and that economic activity had risen at a moderate rate. | 2,004 | 2 |
For example, although a number of features of Brazilian law promote the independence of the nation's central bank, the bank's de facto independence may be limited by the power of the president to remove members of the Monetary Policy Committee. | 2,004 | 2 |
At the same time, however, the near-term outlook for inflation had deteriorated, and the risks that underlying inflation pressures could prove to be greater than anticipated appeared to have risen. | 2,021 | 1 |
The effect can be accentuated by the temporary parking in liquid accounts of the proceeds from the more-frequent turnover and refinancings that often accompany a house price boom. | 2,005 | 1 |
Persistent inflation shortfalls carry the risk that longer-term inflation expectations become anchored below the stated inflation goal.13 In part because of that concern, some economists have advocated "makeup" strategies under which policymakers seek to undo past inflation deviations from target. | 2,007 | 0 |
Even so, most members viewed a slowing to a rate closer to most estimates of the growth of the economy's potential as a reasonable expectation. | 2,004 | 2 |
Conclusion In conclusion, let us not forget that the declines in inflation over the past two decades and the resulting boost to monetary credibility we currently enjoy were earned with some economic pain, as the pace of economic activity was slowed, at times severely, to bring inflation down. | 2,008 | 1 |
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 |
"The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. | 2,011 | 2 |
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 |
Discussion of Communications Regarding Economic Projections As a follow-up to the FOMC's discussion in October about providing more information on the Committee's collective judgment regarding the economic outlook and appropriate monetary policy, the staff presented several options for enhancing the Summary of Economic Projections (SEP). | 2,016 | 2 |
Investor perceptions of a somewhat less accommodative tone of Federal Reserve communications, as well as the softer-than-expected reading for the April CPI, likely contributed to the decline in inflation compensation. | 2,020 | 0 |
The emphasis was on providing currency and reserves to meet seasonal demands and on assisting banks in accommodating the credit needs of commerce and business. | 2,005 | 0 |
Against this background, the members agreed on the need to continue to monitor the economy with care for signs either of a potential upturn in inflation or greater softness in the expansion than they were currently forecasting and to be prepared to respond promptly in either direction. | 1,997 | 2 |
There are, however, some problems with this story as the principal explanation for the favorable inflation performance. | 2,004 | 2 |
Implications of Economic Theory I am going to assert some conclusions based on economic theory that help to understand the potential for monetary policy to achieve these objectives and the consistency among them. | 2,022 | 2 |
In contrast, changes in inflation rates in some services categories, such as shelter costs, tend to be more persistent. | 2,007 | 2 |
Staff Economic Outlook In the forecast prepared for the March FOMC meeting, the staff's outlook for real economic activity was broadly similar to that at the time of the January meeting. | 2,001 | 2 |
And, of course, despite the improvements seen in the May jobs report, the unemployment rate, at 13.3 percent, remains historically high. | 2,006 | 0 |
Given the difficulty in assigning productivity increases by industry, there is a dispute on how widely productivity implicit in the information revolution has spread across the economy. | 1,998 | 0 |
As a result, as in the January forecast, real GDP was expected to rise at a moderate pace over 2011 and 2012, supported by accommodative monetary policy, increasing credit availability, and greater household and business confidence. | 2,015 | 0 |
Some participants suggested that shifts of funds from abroad into U. S. Treasury securities may have put downward pressure on term premiums; the shifts, in turn, may have reflected in part a reaction to declines in foreign sovereign yields in response to actual and anticipated monetary policy actions abroad. | 2,009 | 2 |
Finally, while my assessment of maximum employment incorporates a wide range of indicators to assess the state of the labor market—including indicators of labor compensation, productivity, and price-cost markups—the employment data I look at, such as the Kansas City Fed's Labor Market Conditions Indicators, are historically highly correlated with the unemployment rate.8 My expectation today is that the labor market by the end of 2022 will have reached my assessment of maximum employment if the unemployment rate has declined by then to the SEP median of modal projections of 3.8 percent. | 2,006 | 1 |
Back then, the unemployment rate was 8.1percent and nonfarm payrolls were reported to have increased at a monthly rate of 97,000 over the prior six months; today, those figures are 7.6 percent and 194,000, respectively. | 2,007 | 2 |
The expansion of M3 picked up over September and October, reflecting a strong acceleration in its non-M2 component that was associated with strong inflows to institutional money market funds and stepped-up issuance of large time deposits to meet credit demands. | 2,009 | 1 |
We know that the short end of the yield curve is dominated by monetary policy and cyclical factors. | 2,021 | 2 |
More than two years after the recession trough, and following several quarters of strong growth, the historically normal pattern would be for the Fed to be well into the process of tightening policy by now. | 2,002 | 1 |
Labor markets appeared to be stabilizing as private nonfarm payrolls grew in September for the first time since January, and employment losses in July and August turned out to be smaller than data initially had indicated. | 2,022 | 2 |
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 |
As we all know, starting in late February or March of last year, widespread economic and social lockdowns and other effects of the pandemic caused the swiftest and deepest contraction in employment and economic activity since the Great Depression. | 2,004 | 0 |
Most participants expected that, following the slowdown in the first quarter, real economic activity would resume expansion at a moderate pace, and that labor market conditions would improve further. | 2,007 | 2 |
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 |
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