Economic Outlook and Monetary Policy:
- The unwinding of the pandemic effects make this cycle unique. We are still learning about how it plays out.
- We may have underestimated balance sheet strength households, businesses. There can still be more of that than we think in terms of savings.
- Don’t think there’s been a structural change in consumption.
- Risks are getting more balanced on doing too much versus doing too little.
- Until now, concern was not doing enough on rates. Now we are still trying to gain confidence in an appropriate stance.
- In future, it may be that the labor market becomes more important for inflation.
- Wages are not the principal driver of inflation so far.
- September reading on employment cost index it was very close to internal expectations.
- Wage increases have really come down significantly over the last 18 months.
- We are focused on looking at data and giving ourselves a little more time now to parse it in order to decide policy stance.
- Within a range of estimates of the neutral rate, and policy is restrictive.
- The public believes that inflation will come down. That’s critical in winning the battle.
- Inflation a door in a good place. There is no crack in that armor.
- We are committed to getting inflation back down to our target, and we will.
- Letting higher inflation expectations get embedded is a prescription for misery.
- We’ve come far enough on policy that wrists are now more two-sided.
- We feel like we are on a path to make more progress on inflation.
- It may take some time for inflation to come down.
- Inflation progress will come in lumps, be bumpy.
Interest Rates and Monetary Policy Tools:
- We don’t have any reason to think these rate hikes are materially changing that picture.
- We’ve been working a lot with financial firms to make sure they have good funding plans.
- We would never look at long-term treasury rates in isolation; we look at them as part of a broader picture.
- On new regulations, we will come to a package that has broad support.
- Reserves are not even close to scarce at this point.
- QT may be playing a relatively small role in rising longer-term rates.
- We are not considering changing paystub balance sheet runoff.
- Policy was restrictive, and we see it affects.
- We are proceeding carefully.
- We are close to the end of the cycle.
- We have come very far with this rate hike cycle.
- We are going to look at the full range of economic data, including financial conditions.
- We are going meeting by meeting.
- We are seeing elevated potential growth.
- As we approach the next meeting, we will be talking about how we process the data.
- We tried to be transparent in our thinking.
- The efficacy of the dot plot decays during inter-meeting.
Inflation and Economic Impact:
- High inflation is painful for people.
- This has been a resilient economy.
- See effects of higher rates on housing market, surveys on durables buying.
- It can have implications on monetary policy.
- We aren’t confident financial conditions are restrictive enough.
- We are not confident yet we have achieved a sufficiently restrictive stance of policy.
Uncertainty and Future Policy Decisions:
- This is one reason we have slowed the process down this year.
- We have to make policy under great uncertainty.
- Still very hard to say the length of lags of policy.
- Supply side gains have really been helping, but those things will run their course.
- I still believe and colleagues also that it is likely we will need to see slower growth, softening in labor market conditions.
- That’s very welcome.
- We have been very gratified that we’ve made significant progress without a spike in unemployment.
- The best thing we can do for the U.S. is to fully restore price stability, with the least damage we can.
- If we reach a judgment we need to tighten, we will.
- We are attentive to an increase in longer-term yields.
This article was written by Greg Michalowski at www.forexlive.com.
