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FinanceMTEB 6

These geopolitical events also pose downside risks to growth.

dovish

By fostering increased interactions among central banks, academics, and the public in many different countries, globalization has helped spread a common culture that stresses the benefits of achieving price stability.

hawkish

With respect to inflation, the netting of the crosscurrents suggests a modest increase in inflation in 1998, albeit from a steadily downward-revised and very low rate in 1997.

hawkish

Domestic respondents to the April SLOOS generally reported tightening their lending standards and experiencing weaker loan demand across all major CRE loan categories during the first quarter.

dovish

First, there is a tug of war between the continued exceptional momentum in private domestic demand and the external drag from the Asian crisis.

neutral

Productivity and the equilibrium real interest rate.

neutral

Total nonfarm payroll employment expanded at a solid pace in July and August.

hawkish

For 2000, the Committee agreed on a tentative basis in June to retain the same ranges for growth of the monetary aggregates and debt, measured from the fourth quarter of 1999 to the fourth quarter of 2000.

neutral

To keep the experiments as clean as possible, I assume that the economy begins at full employment and with both headline and core inflation at desired levels.

neutral

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?

neutral

A second question is whether moving in this direction would matter much for the conduct of monetary policy in the United States.

neutral

The Committee directs the Desk to purchase GSE debt, GSE-guaranteed MBS, and longer-term Treasury securities during the intermeeting period with the aim of providing support to private credit markets and economic activity.

dovish

Indeed, over the past century, by far the smallest part of the growth in America's real gross domestic product reflects increased physical product measured in bulk or weight.

neutral

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

neutral

I think the—you know, in a way, the least tight aspect of it is, is looking at the unemployment rate, which is still below our median estimate of, of [the unemployment rate consistent with] maximum employment.

dovish

The deceleration seemed to reflect primarily an unwinding of heightened demand for the relative safety and liquidity of money market mutual funds that had boosted M2 in prior months.

dovish

A few participants pointed to continued strong growth in multifamily construction, although the limited pipeline of new projects in one District suggested that activity could slow in 2015.

neutral

The first question is whether the degree of easing implemented in response to financial market turbulence and the abrupt downward revision in the forecast should be reassessed in light of the subsequent improvement in financial conditions and the continued robustness of domestic demand.

hawkish

The members generally agreed that, if necessary, their concerns about rising inflation could be addressed at the meeting in early February.

hawkish

Nevertheless, the path of inflation is the biggest risk to my outlook.

hawkish

And so you’re seeing prices are moving back up off their lows there.

hawkish

In Japan, private consumption rebounded strongly, and private investment and net exports continued to boost growth.

neutral

Some occasions call for significant swings in currency or reserves because of seasonal demands for cash and loans.

neutral

The Federal Reserve Bank of New York was authorized and directed, until instructed otherwise by the Committee, to execute transactions in the System Account in accordance with the following domestic policy directive: The information reviewed at this meeting suggests that the expansion in economic activity has slowed considerably after a very rapid advance in the first quarter.

dovish

Some evidence exists that quantitative easing can stimulate the economy even when interest rates are near zero; see, for example, Christina Romer's (1992) discussion of the effects of increases in the money supply during the Great Depression in the United States.

dovish

One member was persuaded that policy had already become so expansionary that further easing ran an unacceptable risk of exacerbating inflation over time.

hawkish

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.

dovish

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.

hawkish

The number of black-owned firms increased nearly 50 percent and the number of Hispanic-owned firms jumped 80 percent between 1987 and 1992--between two and three times the rate of growth of non-minority-owned firms.

neutral

Participants' Views on Current Economic 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 2021 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

Because good forecasts are so crucial to good monetary policy, I hope and expect to see a great deal more work exploring the robustness of alternative forecasting methods.

neutral

Case studies of individual industries show that, in some cases, the planning for technological modernization has not always been adequate, with the result that some purchases of high-tech equipment and software have not added much to productivity or profits.

neutral

And it’s natural that if it can be employed that, just as monetary policy is doing a lot to try to June 15, 2016 stimulate growth, that fiscal policy should play a role.

dovish

The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.

neutral

Therefore, even in the case of personal computers, where we have made such great strides in measuring quality changes, I suspect that important phenomena still may not be adequately captured by our published price indexes.

neutral

For example, we have used some of our work to look at interest rate risk and interest rate sensitivity and, you know, found generally that banks can also sustain a significant increase in long-term interest rates as well for a number of reasons, one of them being that higher interest rates increase their franchise value because it increases their net interest margin over time.

neutral

It is now generally recognized that price stability is a prerequisite for the efficient allocation of resources in our economy and, indeed, for fulfilling our ultimate mandate to promote maximum sustainable employment over time.

hawkish

As you said, falling oil prices pull down inflation.

dovish

Some uncertainties, such as those associated with the election, had been resolved, but others persisted, including the prospects for oil prices and their consequences for the economy.

neutral

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.

neutral

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.

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 nominal deficit on U. S. trade in goods and services widened substantially in the second quarter.

hawkish

While more moderate growth in consumer spending for durable goods seemed likely after an extended period of robust expansion, these favorable factors suggested that the risks of a different outcome were tilted in the direction of faster-than-projected expansion.

hawkish

In essence, monetary credibility helps the central bank do its job, by inducing private sector participants also to take actions that help achieve the central bank's low inflation objective.

hawkish

With inventories lower, firms were beginning to raise production to meet at least a portion of increased demand, and this adjustment was expected to make an important contribution to economic recovery in the fourth quarter of the year and, to a lesser extent, in 2010 as well.

neutral

The forecast for headline inflation was in the same range as that for core inflation in 2008 and 2009, reflecting expectations that energy prices would level off and then turn down and that increases in food prices would slow to a pace more in line with core inflation.

neutral

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

dovish

Though labor markets were expected to remain relatively tight for some time, the members saw little prospect that inflation would gather significant momentum in coming quarters.

neutral

As far as—as the policy rate, what we’ve said is that we will maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals.

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

Two noted the possibility that sustained high levels of long-term unemployment could result in higher structural unemployment, an outcome that might be forestalled by increased aggregate demand.

dovish

Inflation continued to run below the Committee's longer-run objective, held down in part by the effects of declines in energy and non-energy import prices.

dovish

Available information suggested that economic activity in the major foreign industrial countries continued to advance, but at an uneven pace; in Germany, activity rebounded from the contraction in the first quarter, while in Japan a considerable slowing of growth had occurred in the second quarter after very rapid expansion in the first quarter.

neutral

Moreover, in light of the anticipated modest pace of economic recovery, the Committee expects that over coming quarters the unemployment rate will decline only gradually toward its mandate-consistent levels.

dovish

Equity prices in most foreign countries were up moderately since the January FOMC meeting.

neutral

Over time, spot prices are inexorably drawn back to the long-term equilibrium price, as the balance between underlying supply and demand is restored.

neutral

However, I can provide you with some insight into the way the FOMC functions and the impact of monetary policy on the U.S. and global economies.

neutral

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

Despite some recent turbulence, owing in part to geopolitical events, stock prices have logged robust gains over the past 3-1/2 years, and broad equity indices have now retraced most of the ground lost between 2000 and 2002.

neutral

Now with respect to the first objective, the rationale for maximizing employment is fairly obvious.

dovish

In hindsight, the paths of inflation, real output, stock prices and exchange rates may have seemed preordained, but no such insight existed as we experienced it at the time.

neutral

Implications of Increases in Productivity Growth In the long run, the implications of increases in productivity growth rates are fairly obvious.

dovish

The uncertainty about the threshold unemployment rate also suggests a differing degree of intensity in the response of monetary policy to deviations of inflation and output to their respective targets.

neutral

The Federal Reserve’s response is guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system.

hawkish

While there were no current indications that inflation might be accelerating and no policy move was called for at this time, the members saw a need for continuing vigilance.

neutral

Inflation pressures remain muted, and indicators of longer-term inflation expectations are at the lower end of their historic ranges.

dovish

The external sector was projected to continue to support domestic economic activity throughout the forecast period.

neutral

Critical though this issue is, it does not by itself capture the importance of productivity.

neutral

Vice Chair Richard H. Clarida At the 2020 U.S. Monetary Policy Forum, sponsored by the Initiative on Global Markets at the University of Chicago Booth School of Business, New York, New York Share Thank you to the conference organizers for inviting me here to discuss what former Chair Bernanke has famously referred to as a "hall of mirrors" problem: a situation in which a central bank's reaction function and financial market prices interact in economically suboptimal and potentially destabilizing ways.1 In my remarks today, I will lay out the way I think about the interplay between financial markets and monetary policy, with a focus on how I myself seek to integrate noisy but often correlated signals about the economy that I glean from models, surveys, and financial markets.2 Three Observations I begin with three unobjectionable observations.

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

That ex post relationship, the correlation between actual--instead of intended--domestic saving and domestic investment was the object of the seminal work by Feldstein and Horioka a quarter century ago.4 Without the evident worldwide fall in home bias over the past decade, noted earlier, the United States would not have been able to finance its recent current account deficits, and, accordingly, these deficits would have been smaller.

neutral

But if the economy instead began to overheat, threatening to push inflation to an undesirably high level, the FOMC would have ample scope to respond through tighter monetary policy.

hawkish

Among other questions that could be addressed would be how policy actions (as opposed to inflation outcomes) influence expectations and how sensitive Federal Reserve credibility is to short-run departures from low inflation.

neutral

In these circumstances, a pause seemed desirable to monitor the still-incomplete effects of the Committee's easing over the past year--a significant part of which had been implemented in recent months--and the contours of the turnaround in economic activity.

dovish

Later in the period, AFE yields partially rebounded and foreign equity prices fully recovered on some easing of U. S. ­–China trade tensions, as well as perceptions of reduced political uncertainty in the United Kingdom and Italy.

neutral

Labor market conditions had improved further, with solid job gains and a lower unemployment rate; taken as a whole, labor market indicators suggested that the underutilization of labor resources was continuing to diminish.

hawkish

Some members observed that while slower growth in consumer spending was the most probable forecast, they saw an upside risk from the wealth effects of the large rise that had occurred in the value of stock market holdings.

neutral

To be sure, financial market signals are noisy, and day-to-day movements in asset prices are unlikely to tell us much about the cyclical or structural position of the economy, let alone r* and expected inflation.

neutral

In particular, investors noted that the Committee attributed some of the recent increase in inflation to transitory factors, retained its earlier balance of risks assessment, and reiterated its belief that policy accommodation could be removed at a pace that would likely be measured.

hawkish

The weakness in labor market conditions remained an important concern to meeting participants, with unemployment expected to remain elevated for some time.

dovish