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FinanceMTEB 6

The evidence suggests that new technology often results in more growth in employment in innovating industries.

neutral

We expect the economy will continue to perform well, with the job market strengthening further and inflation rising to 2 percent over the next couple of years.

neutral

It would consist of inflation plus—plus productivity growth.

neutral

It was generally agreed that developments relating to energy would continue to exert upward pressure on prices over the near term, including the passthrough or indirect effects of higher oil prices on core measures of inflation.

hawkish

With gross retail margins amounting to about 30 percent of sales, a reduction in currently elevated margins could make an important contribution to reduced inflation pressures in consumer goods.

hawkish

My fellow governors and I routinely receive from our staff a translation of the term structure of Treasury yields into implied forward rates, volatility inferred from options prices, and paths for expected monetary policy action consistent with futures prices.

neutral

These indicators suggested that the financial system was fairly resilient, as did the absence of a significant increase in funding stresses or margin calls earlier this year when prices of risky assets fell and volatility rose sharply.

neutral

And the growth of telegraphy enabled railroads to better coordinate the movement of trains over a wider area.

neutral

That said, the data also indicate that a surge in COVID-19 cases in the summer and supply-chain bottlenecks held back economic activity in the third quarter.

dovish

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.

neutral

Most other interest rates in short-term markets were little changed over the period.

neutral

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

Relative to the average episode, commercial real estate prices neither fell much during the recession nor rose a lot during the expansion.

neutral

One of Dick Porter's many contributions was to develop a monetary approach to forecasting inflation at medium-term horizons.

neutral

In that regard, the prospective strength of demand pressures and related outlook for productivity were subject to a wide range of uncertainty, and there were reasons to believe that economic growth could well slow without any adjustment to policy.

dovish

Recent data on core consumer prices led the staff to mark down slightly its forecast for core PCE inflation.

dovish

Moreover, a 50 basis point reduction that was associated with the communication of a Committee view that the risks to achieving its objectives for economic activity were balanced might be mistakenly interpreted in the view of some members as a signal that the Committee had come to the end of its policy easing moves--a judgment they were not prepared to make at this time.

dovish

U. S. real GDP was forecast to plummet and the unemployment rate to soar in the second quarter of this year.

dovish

The housing sector has fully recovered from the downturn, supported in part by low mortgage interest rates.

dovish

A key purpose of our review has been to take stock of the lessons learned over this period and identify any further changes in our monetary policy framework that could enhance our ability to achieve our maximum-employment and price-stability objectives in the years ahead.9 Our evolving understanding of four key economic developments motivated our review.

neutral

Of the 1,700 Washington employees, roughly 250 are Ph.D. economists, the majority of whom support the Board's monetary policy responsibilities.

neutral

First, the projected rates of productivity gains and potential output growth over the medium term were trimmed.

dovish

Energy prices were moderating noticeably in response to lower worldwide demand, and core price inflation remained subdued.

dovish

So for many, many years, we’ve been far from maximum employment and stable prices, and so the need for accommodative policy has been—has been clear.

dovish

In their discussion of the economic situation and the outlook, meeting participants viewed the information received over the intermeeting period as suggesting that economic activity had been expanding moderately despite the global economic and financial developments of recent months.

neutral

As a result, the likely pace and extent of policy easing expected by investors increased, and yields on nominal and inflation-indexed Treasury coupon securities fell.

dovish

Market-based measures of inflation compensation have moved up but remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

neutral

Real GDP was forecast to decline and the unemployment rate to rise, on net, in the first half of this year.

dovish

Indeed, in the interest of fostering a continuation of sustainable growth of the economy, it would be desirable to tighten before any sign of actual higher inflation were to become evident.

hawkish

In July, the range for M3 had been raised by two percentage points to reflect developments that seemed to be fostering a return to the historical pattern of somewhat faster growth in M3 than in M2.

dovish

Some members expressed concern about the longer-run prospects for large federal deficits and their implications for the future performance of the economy.

dovish

That should gradually return the economy to full utilization of its resources, while inflation remains subdued.

dovish

In particular, incoming data and anecdotal information indicated that economic activity had appreciably more forward momentum than previously perceived and that inflation pressures could be intensifying.

hawkish

With regard to the nation as a whole, members noted that rising levels of employment and incomes were continuing to foster solid growth in consumer spending, a development that was abetted by the sharp increases that had occurred in household wealth as a consequence of the extended uptrend in stock market prices and to a lesser extent the appreciation of home prices.

hawkish

In general, participants viewed recent consumer price developments as consistent with their expectation that inflation was on a trajectory to achieve the Committee's symmetric 2 percent objective on a sustained basis.

neutral

One might even argue that if a central bank ever converged on a single monetary rule, there would be no need for a monetary policy committee.

neutral

Inflation Targeting and Central Bank Behavior," Federal Reserve Bank of New York, mimeo.

neutral

Those few members who expressed a preference for easing at this meeting believed that, with unit labor costs and inflation expectations contained, enough evidence of further weakness already existed to warrant an immediate action.

dovish

The Committee then turned to a discussion of the economic and financial outlook and the implementation of monetary policy over the intermeeting period ahead.

neutral

These are exactly the concerns expressed in Tom Sargent’s (2000) book on the rise and fall of U.S. inflation, in which he worries that a misunderstanding of the inflation process might again lead to a high-inflation equilibrium.

hawkish

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

The members recognized that a typical recovery-period surge in consumer spending was unlikely inasmuch as expenditures had registered solid growth through the economic downturn, implying an absence of significant pent-up demands.

dovish

Although prospects for economic activity had not deteriorated significantly since the March meeting, the outlook for growth and employment remained weak and slack in resource utilization was likely to increase.

dovish

The significant decreases that had occurred in the prices of fuel oil and gasoline were a positive factor that would continue to bolster household spending for a while.

neutral

In response to evidence of a slowdown in economic activity and a rapid waning of inflationary pressures, central banks around the world eased policy sharply.

dovish

If we think that the potential growth rate of the economy is somewhere between, somewhere around 1.75 percent, 2.8 percent is strong economic growth.

dovish

By contrast, economic activity in China and other developing countries showed greater buoyancy.

neutral

Advances in productivity had boosted profit margins, and high margins were helpful in that they could absorb some portion of any cost increases for a time.

neutral

Monthly increases in nonfarm payroll employment averaged nearly 180, 000 over the three months ending in November, in line with the average pace of job creation over the past year.

neutral

A more robust contour for final sales over the forecast horizon would lead to somewhat greater pressure on resource margins, despite the expected strong growth of structural productivity, though the level of activity would remain below the economy's potential for some time.

dovish

There is no evidence to date that a strong labor market is putting excessive cost-push pressure on price inflation.

neutral

Thus, reducing vacancies from an extremely high level to a lower (but still strong) level has a relatively limited effect on hiring and on unemployment.

neutral

The tendency may be natural to allow more flexibility when central banks are focused on inflation maintenance than when they seek inflation reduction.

dovish

You know, we’re, we’re—inflation measures are always going to be a bit volatile.

neutral

Participants agreed that the longer-run normal federal funds rate was likely lower than in the past, in part because of secular forces that had put downward pressure on real interest rates.

dovish

Our Congressional mandate is to achieve full employment and price stability in the United States.

hawkish

By getting unemployment down, we hope to bring back to work some of the people who’ve been out of work as long as they have and, in that respect, try to avoid the longer-term consequences of people being out of work for months at a time.

dovish

The behavior of the monetary aggregates will continue to be evaluated in the light of progress toward price level stability, movements in their velocities, and developments in the economy and financial markets.

neutral

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.

neutral

Recent data, supported by anecdotal reports from several though not all parts of the country, suggested that residential building activity was slowing somewhat, apparently in lagged response to earlier increases in mortgage interest rates.

hawkish

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: "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output.

hawkish

Indeed, the discrepancy between actual and predicted money growth was sufficiently large that the P* model, if not subjected to judgmental adjustments, would have predicted deflation for 1991 and 1992.

neutral

At the moment, trend growth near full employment appears to be a reasonable prospect in the year ahead.

hawkish

Indeed, economic growth abroad was widely viewed as dependent to a significant extent on the performance of the U. S. economy.

neutral

And if the stock theory of the portfolio is correct, which we believe it is, holding all of those securities off of the market and reinvesting and still keeping the, you know, rolling-over maturing securities, will still continue to put downward pressure on interest rates.

dovish

Meeting Participants' Views and Committee Policy ActionIn conjunction with this FOMC meeting, all meeting participants-the four members of the Board of Governors and the presidents of the twelve Federal Reserve Banks-provided projections for economic growth, the unemployment rate, and consumer price inflation for each year from 2009 through 2011.

neutral

Yet, with a few exceptions, the available data show that productivity growth in other advanced countries has not increased to the extent seen in the United States.

dovish

The bottom line is that past performance, in several important dimensions, has been extraordinary and that prospects look favorable for continued expansion and relatively low inflation.

dovish

Economic DevelopmentsReal economic activity has continued to expand at a solid pace.

hawkish

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.

dovish

On the supply side, the effect is fairly clear and immediate: An increase in trend productivity growth implies a more rapid pace of growth of the economy's productive capacity.

hawkish

I don’t know that demand for reserves has risen over the past years.

neutral

Since June, however, inflation fears have receded, and some financial-market participants have become less optimistic about the economy's near-term growth prospects.

dovish

The pace of job gains slowed and the unemployment rate held steady.

neutral

Rather, it is that the underlying sources of productivity growth are very complex.

dovish

But, I would say, overall, we’re trying to sustain the expansion and keep, you know, close to our statutory goals, which are maximum employment and stable prices.

hawkish

I don’t really think asset prices themselves represent a significant threat to financial stability, and that’s because households are in good shape financially than they have been.

dovish

Risks to the inflation projection also were seen as balanced.

neutral

This paper develops and estimates a habit persistence consumption asset pricing model in which the sign of the equilibrium covariance between equity and bond returns depends on the reduced-form correlation between inflation and the output gap, the correlation between the federal funds rate and the output gap, as well as the equilibrium persistence of inflation.

neutral

Because inflation normally responds slowly to such shocks, inflation targeters could respond in any of three ways.

hawkish

But the importance of price stability has sometimes been insufficiently appreciated in our central bank's history, and, as Allan Meltzer will soon point out, such episodes have had unfortunate consequences.

hawkish

Participants' Views on Current Conditions and the Economic Outlook In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2022 through 2024 and over the longer run based on their individual assessments of appropriate monetary policy, including the path of the federal funds rate.

neutral

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.

neutral

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.

dovish

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.

hawkish

Staff Economic Outlook In the economic forecast prepared by the staff for the June FOMC meeting, real GDP growth in the second half of this year was expected to step up from its pace in the first half.

hawkish

Although some of the recent data on economic activity had been better than anticipated, most participants saw the incoming information as broadly in line with their earlier projections for moderate growth; accordingly, their views on the economic outlook had not changed appreciably.

neutral

Now, with inflation below 2 percent, I think it’s appropriate that the labor market be that tight.

dovish

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.

neutral

The FOMC's primary monetary policy tool is its target range for the federal funds rate.

neutral

The distortions in the markets I have reviewed do not appear all that large, given the stance of monetary policy, and should we experience much higher interest rates and softer asset prices our resilient markets and flexible economy probably could absorb such a shock.

hawkish

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 SOMA 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.

dovish

In addition, the Survey of Terms of Business Lending conducted in the first week of November showed that interest rates on C&I loans were generally little changed while spreads remained extremely wide.

hawkish

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: "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output.

hawkish

However, as had been the case for many years, the members remained concerned that forecasts of money growth were still subject to a wide range of error in terms of the anticipated relationships between money growth and aggregate economic performance.

neutral

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.

dovish

Policymakers, economists, and market participants see much of this decline as reflecting a permanent fall in the equilibrium rate of interest—that is, the level of the federal funds rate that keeps the economy at full employment with stable inflation in the longer run.

dovish

These policy moves would therefore prevent the far greater economic pain associated with entrenched high inflation, including the even tighter policy and more severe restraint on economic activity that would then be needed to restore price stability.

hawkish

An intuitive way of thinking about this rise and fall in inflation persistence is that it resulted from an un-anchoring of trend inflation during the period of the Great Inflation, and a re-anchoring in recent years, as the work of Stock and Watson suggests.

neutral

Most participants remarked that the standard of "substantial further progress" had been met with regard to the Committee's price-stability goal or that it was likely to be met soon.

hawkish