Datasets:

TextCEsInFinance

/

fomc-communication

like 0

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.

neutral

The current range readily encompassed the growth rate seen likely to be associated with the members' forecasts for economic activity and prices.

neutral

The vote also encompassed approval of the sentence below for inclusion in the press statement to be released shortly after the meeting: Against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the Committee believes that the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.

hawkish

They noted that economic activity and employment had continued to recover

neutral

Prices, interest rates, stock prices, and other signals produced by market economies to encourage the distribution of productive resources have no inherent moral content.

neutral

Auctions of GSE debt following the conservatorship announcement reportedly attracted heavy demand, but market participants indicated that liquidity in the secondary market for GSE debt remained somewhat lower than normal.

neutral

A number of global factors were seen as contributing to downward pressure on term premiums, including central bank asset purchase programs and the strong worldwide demand for safe assets.

hawkish

Members agreed that their policy decisions would remain data dependent, and they continued to include wording in the statement noting that if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate would likely occur sooner than currently anticipated, and, similarly, that if progress proves slower than expected, then increases in the target range would likely occur later than currently anticipated.

neutral

Increase the System Open Market Account holdings of Treasury securities, agency mortgage-backed securities (MBS), and agency commercial mortgage-backed securities (CMBS) at least at the current pace to sustain smooth functioning of markets for these securities, thereby fostering effective transmission of monetary policy to broader financial conditions.

dovish

Rents have grown dramatically, and while home sales have slowed, the continued increasing price of single-family homes indicates to me that rents won't decline anytime in the near future.

hawkish

However, we have also found that excluding volatile food and energy prices generally gives a better sense of underlying inflation pressures that are likely to persist and dominate total inflation over time.

neutral

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.

neutral

The severity of the 1981-82 recession, the worst of the postwar period, clearly illustrates the danger of letting inflation get out of control.

hawkish

The course of underlying inflation pressures was more difficult to gauge, however.

neutral

And we’ve seen significant outflows of capital from those countries, pressures on their exchange rates, and concerns about their performance going forward.

neutral

We said that we would "aim to achieve inflation moderately above 2 percent for some time" to ensure that it averages 2 percent over time and that inflation expectations stay anchored.

dovish

And what it is is, it’s an expression of the thinking about individual Committee members about appropriate monetary policy and the path of the economy.

neutral

They also agreed that the war and related events were creating additional upward pressure on inflation and were weighing on global economic activity.

hawkish

In addition to the headwinds facing demand, there could be persistent effects on the supply side of the economy.

dovish

In the residential real estate sector, home sales, prices, and construction had shown signs of stabilization in many areas and were increasing modestly in others, but a still-sizable inventory of unsold existing homes continued to restrain homebuilding.

neutral

Nonfarm payroll employment increased sharply further in January and February, and the civilian unemployment rate, at 4.

hawkish

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.

dovish

Major reasons for optimism about the outlook were the substantial easing in monetary policy, whose lagged effects would be felt increasingly in the year ahead, and the fiscal stimulus measures that already had been enacted and might well be supplemented over coming months.

dovish

Strong fundamentals, including low interest rates, wide profit margins, and a high level of liquid assets, were seen as supporting expenditures on software and equipment going forward.

dovish

Although single-family housing starts had come down substantially from their peak, the drop had lagged the decline in demand, and as a result, inventories of new homes had risen considerably.

dovish

So tonight, I would like to take a few minutes to put this action in the broad context of the Fed’s mandate to promote the stable financial environment that will encourage economic growth.

hawkish

However, with tightening resource constraints indicating unsustainable growth, only tentative signs that growth might be slowing, and various factors that had been damping prices now turning around, all the members agreed on the need for a slight tightening at this meeting to raise the odds on containing inflation and forestalling the inflationary imbalances that would undercut the very favorable performance of the economy.

hawkish

Now, members of the Committee have different views about why this is likely to be true, that the funds rate—when the labor market is normalized and inflation is back to our objective—they maybe have slightly different views on exactly why it’s likely to be the case that interest rates will be a little lower than they would in the longer run.

dovish

The early days of stabilization policy in the 1950s taught monetary policymakers not to attempt to offset what are likely to be temporary fluctuations in inflation.15 Indeed, responding may do more harm than good, particularly in an era where policy rates are much closer to the effective lower bound even in good times.

dovish

Trends in wages and prices have remained stable in recent months.

neutral

And, and those are—that’s again—that goes to keeping this episode as short as it can be and avoiding unnecessary business bankruptcies, unnecessary household bankruptcies, and unnecessary long-term stays of unemployment or supporting people through them so that they can maintain their financial footing and their lives and be able to go back to work in a productive way.

dovish

The benefits achieved through more-stable prices are substantial.

hawkish

Several saw that outlook as depending importantly on continued strengthening of the labor market or on an above-trend pace of economic activity.

neutral

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.

hawkish

Indeed, financial services firms had already announced layoffs, largely reflecting mortgage market developments, the demand for temporary workers appeared to have softened, and the most recent weakening in construction employment was likely to continue for a while.

dovish

Some participants stated that low interest rates appeared to be contributing to strong sales of autos or, more generally, of consumer durables.

neutral

They noted that the economy had entered the new year with considerable momentum and very few indications that growth was moderating from what appeared to be an unsustainable rate.

hawkish

To the extent the global economy is weak and the United States is strong, it’ll—we’ll wind up, you know, we’ll wind up exporting some of our demand through, through imports rather than having, having a lot of exports.

hawkish

Price shocks.

neutral

The vote encompassed approval of the paragraph below for inclusion in the statement to be released shortly after the meeting: "The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information.

hawkish

The behavior of inflation had been unexpectedly benign for an extended period of time for reasons that were not fully understood.

neutral

I should note that growth itself does not cause inflation.

neutral

But an intriguing alternative is to set a target for the price level.

neutral

Job gains had remained solid, and the unemployment rate had stayed near its recent low.

hawkish

Indicators of longer-term inflation expectations were little changed, on balance.

neutral

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.

hawkish

Going forward, consumer outlays were expected to be supported by further advances in employment and income.

hawkish

However, with longer-term interest rates already very low, there did not appear to be a need for enhanced forward guidance at this juncture or much scope for forward guidance to put additional downward pressure on yields.

neutral

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.

hawkish

The major reason for these significant differences in spending out of household wealth is doubtless that, while home prices do on occasion decline, large declines are rare; the general experience of homeowners is a modest, but persistent, rise in home values that is perceived to be largely permanent.

hawkish

I think that keeping interest rates low is still appropriate for our economy.

dovish

We need to remember that in decades past it was believed that monetary policy was most effective when it was least transparent.

neutral

The increase over the last few months in five-year measures of inflation compensation derived from Treasury nominal and inflation-indexed securities might be a warning sign that expectations were not as well anchored as they had been over the summer.

hawkish

Given the pressure of a considerable amount of unused resources, any adverse developments that held down economic expansion would increase the probability of further disinflation.

dovish

In 1951, the Treasury-Federal Reserve Accord freed the Fed from the obligation to support Treasury bond prices.

neutral

It’s where we always want inflation to be heading.

neutral

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.

dovish

As always, each participant’s projections are conditioned on his or her own view of appropriate monetary policy.

neutral

Recent data on consumer prices and unit labor costs led the staff to revise down slightly its projection for core PCE price inflation for 2010 and 2011

neutral

One branch of economists holds the view that monetary policy should not be influenced by any perceived financial market bubbles.

neutral

We think that the economy will need highly accommodative monetary policy and the use of our tools for an extended period.

dovish

In both of the examples I have just discussed, the medium-frequency evolution of market-based, survey-based, and model-based estimates of r* and expected inflation have, over time, tended to move broadly together.

neutral

Mishkin and Jonas (forthcoming) describe the experiences of the three transition economies with inflation targets.

neutral

Remarkably, 30-year Treasury yields were only slightly lower than 10-year yields throughout the episode, implying that the markets had no confidence that inflation would ever return to 1950s or 1960s levels.

dovish

There was also a sharp acceleration in productivity over 1997, which held down unit labor costs.

dovish

Money growth was damped by a rise in the opportunity cost of holding M2 assets (as typically occurs in periods of policy tightening).

hawkish

A number of participants indicated that the Committee should resume asset purchases only if substantially adverse economic circumstances warranted greater monetary policy accommodation than could be provided by lowering the federal funds rate to the effective lower bound.

dovish

The strength in corporate profits in the first quarter not only impressed economists, but it also impressed investors, who drove stock prices up earlier this year.

neutral

Although a spike in energy prices eroded real income growth in the second quarter, there were solid gains in wages and salaries.

hawkish

Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability. "

neutral

"2 One useful insight into how actual inflation may affect expectations about its future path is based in the concept of "rational inattention.

neutral

After a short coffee break, we have a staff presentation on the alternatives we face in setting monetary policy.

neutral

November 08, 2021 Flexible Average Inflation Targeting and Prospects for U.S. Monetary Policy Vice Chair Richard H. Clarida At the Symposium on Monetary Policy Frameworks, The Brookings Institution, Washington, D.C. (via webcast) Share Watch Live Outlooks and Outcomes for the U.S. Economy The U.S. economy in the second quarter of this year made the transition from economic recovery to economic expansion.1 Given the catastrophic collapse in U.S. economic activity in the first half of 2020 as a result of the global pandemic and the mitigation efforts put in place to contain it, few forecasters could have expected—or even dared to hope—in the spring of last year that the recovery in gross domestic product (GDP), from the sharpest decline in activity since the Great Depression, would be either so robust or as rapid.

dovish

These geopolitical events also pose downside risks to growth.

dovish

In our most recent monetary policy statement—which was released following our January meeting—we indicated that "with inflation well above 2 percent and a strong labor market," we expected that it would "soon be appropriate to raise the target range for the federal funds rate.

hawkish

The staff's forecast for inflation was little changed from the projection prepared for the previous FOMC meeting.

neutral

and it seems to produce results not too different in practice from those associated with central banks that are flexible inflation targeters.

neutral

First, the significant appreciation of the dollar over the last two years has clearly had an important restraining effect on U.S. inflation, both via the direct effect on the prices of imported goods and on the pricing power of domestic firms producing import-competing goods.

dovish

To cite a recent study, Faust and Wright (2007) show that real-time staff forecasts of inflation reliably outperform statistical benchmarks at all horizons and that this advantage is not solely the result of the staff's expertise at estimating near-term inflation rates.

neutral

Economic Outlook and Monetary Policy Now I would like to turn to the current economic scene and this week's FOMC decision.

neutral

The simplest answer is that interest rates should vary to imitate qualitatively the way they would behave if the Fed were implementing a money supply target.

neutral

A key difference between the two groups of countries is that the countries whose current accounts have moved toward deficit have generally experienced substantial housing appreciation and increases in household wealth,

neutral

I did indicate that I do have concerns about the scope for monetary policy.

neutral

Surveys indicated that households’ expectations of inflation over the next year were little changed in February

neutral

In that vein, several participants noted that inflation expectations had been sensitive to incoming data and to communications regarding monetary policy over the intermeeting period.

neutral

Members again mentioned concerns on the part of business contacts regarding the adverse economic implications of very large deficits for the economy over the longer term.

dovish

According to the Taylor Rule, the federal funds rate should adjust over time to changes in utilization rates (the gap between actual and potential output or between the unemployment rate and NAIRU) and to changes in inflation.

neutral

The changes to the policy statement that we made over the fall bring our policy guidance in line with the new framework outlined in the revised Statement on Longer-Run Goals and Monetary Policy Strategy that the Committee approved last August.4 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."

neutral

In its accompanying statement, the Committee indicated that, despite elevated energy prices and hurricane-related disruptions, the expansion in economic activity appeared solid.

hawkish

The unmooring of inflation expectations greatly complicated the process of making monetary policy

neutral

” The vote encompassed approval of the paragraph below for inclusion in the statement to be released shortly after the meeting: “The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal.

neutral

In the household sector, the ongoing deceleration in house prices further restrained the growth of home mortgage debt.

dovish

Over this period, inflation remained above most definitions of price stability, and the Federal Reserve was not actively seeking to reduce it.

neutral

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.

dovish

This is an example of offsetting the attenuation in the response to the output gap with a more aggressive response to inflation realizations.

hawkish

Two members preferred to leave the target range at 1 to 1-1/4 percent, suggesting that the Committee should wait to raise the target range until inflation moves up closer to 2 percent on a sustained basis or inflation expectations increase.

neutral

And I need not remind you that the low inflation we now have was dearly purchased in the late 1970s and early 1980s with the highest interest rates since the Civil War and the highest unemployment rate since the Depression.

dovish

Some also argue that resistance to nominal wage cuts will impart an upward bias to real wages as price stability approaches or outright deflation occurs, leaving the economy with a potentially higher level of unemployment in equilibrium.

dovish

The invasion and related events were creating additional upward pressure on inflation and were likely to weigh on economic activity.

hawkish

By definition, multifactor productivity includes technical change, organizational improvements, cyclical factors, and myriad other influences on output per hour, apart from capital investment.

neutral