Speeches

U.S. economy far from employment, inflation goals

February 24, 2021

Fed Governor Lael Brainard said that the U.S. economy remains far from the Federal Reserve’s goals for employment and inflation and Fed's monetary policy is going to continue to provide support until further progress has been made in boosting inflation and improving the labor market for all workers. She talked about Fed's new framework. Under the new framework Fed will no longer raise interest rates when the unemployment rate is low in anticipation of higher inflation, allowing more time for the labor market to heal and look beyond nominal unemployment rate numbers. 

Fed officials will also plan to keep support in place until average inflation is above 2% and on track to moderately exceed 2% for “some time,” she said.

Read original article on Reuters.

The Federal Reserve's New Framework: Context and Consequences

January 13, 2021

Fed's vice chair Richard H. Clarida gave a speech at the "The Road Ahead for Central Banks," a seminar sponsored by the Hoover Economic Policy Working Group, Hoover Institution, Stanford, California.

In his speech, vice chair talked about Fed's new monetary policy strategy adopted in August 2020: temporary price-level targeting (TPLT). He summarized five features of Fed's TPLT framework:

1. Committee expects to delay liftoff from the ELB (effective lower bound) until PCE (personal consumption expenditures) inflation has risen to 2 percent and other complementary conditions, consistent with achieving this goal on a sustained basis, have also been met.

2. With inflation having run persistently below 2 percent, the Committee will aim to achieve inflation moderately above 2 percent for some time in the service of keeping longer-term inflation expectations well anchored at the 2 percent longer-run goal.

3. The Committee expects that appropriate monetary policy will remain accommodative for some time after the conditions to commence policy normalization have been met.

4. Policy will aim over time to return inflation to its longer-run goal, which remains 2 percent, but not below, once the conditions to commence policy normalization have been met.

5. Inflation that averages 2 percent over time represents an ex ante aspiration of the FOMC, but not a time-inconsistent ex post commitment.

Read the full article here.​

The Economy and Monetary Policy: A Conversation with Fed Vice Chair Richard Clarida at the Hutchins Center on Fiscal & Monetary Policy at Brookings

November 16, 2020

The Hutchins Center on Fiscal & Monetary Policy at Brookings hosted Richard Clarida, vice chair of the Board of Governors of the Federal Reserve, to talk about the latest developments in the economy and in monetary policy. The conversation came two weeks after the Fed’s November policy meeting—and two weeks after Election Day.

Clarida joined the Fed in September 2018 and led the Fed’s recent review of its long-term objectives and monetary policy strategy. He previously served as assistant secretary for economic policy of the U.S. Treasury in the George W. Bush administration, as a managing director of PIMCO, and as a professor at Columbia University.

The video and the transcript of the event. 

Fed governors have recently given a number of speeches emphasizing the implication of flexible average inflation targeting.

October 14, 2020

Richard Clarida's speech at the 2020 Annual Membership Meeting of the Institute of International Finance, Washington, D.C. on October 14, 2020: “U.S. Economic Outlook and Monetary Policy”.

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"The September FOMC meeting was the first since the Committee approved in August our new Statement on Longer-Run Goals and Monetary Policy Strategy and adopted a new policy framework.The changes we made in our September FOMC statement bring our policy guidance in line with this new framework. 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." This language means that going forward, a low unemployment rate, in and of itself, will not be sufficient to trigger a tightening of monetary policy absent any evidence from other indicators that inflation is at risk of moving above mandate-consistent levels. With regard to our price-stability mandate, while the new statement maintains our definition that the longer-run goal for inflation is 2 percent, it elevates the importance—and the challenge—of keeping inflation expectations well anchored at 2 percent in a world in which an effective-lower-bound constraint is, in downturns, binding on the federal funds rate. To this end, the new statement conveys the Committee's judgment that, in order to anchor expectations at the 2 percent level consistent with price stability, it "seeks to achieve inflation that averages 2 percent over time," and—in the same sentence—that therefore "following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time." 

Fed governors have recently given a number of speeches emphasizing the implication of flexible average inflation targeting.

October 7, 2020

John Williams's speech at the Hoover Institution Monetary Policy Virtual Series: The Road Ahead for Central Banks (delivered via video conference) on 7 October 2020: “The Longer-Run Framework: A Look Ahead”.

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"September's FOMC statement clearly linked our policy to the key elements of the new policy framework. In particular, it stated that the Committee expects it will be appropriate to maintain the federal funds rate at its current 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."