00:00So this is a challenging time for monetary policy.
00:03Oftentimes, policymakers are faced with high inflation or high unemployment.
00:08But at the moment, there's pressure on both sides of the mandate.
00:12Inflation continues to be above our 2% objective, and the labor market is showing signs of softening.
00:18High inflation usually calls for raising interest rates to bring inflation down,
00:22but a slowdown in job growth typically calls for reducing interest rates to support the labor market.
00:27Under these conditions, balancing misses to both the maximum employment and price stability sides of the Fed's dual mandate is like walking a tightrope.
00:37At times, it's necessary to use your available tools, whether it's a balancing poll or interest rates, to counterbalance the greater threat.
00:46If you lean too far in either direction, you might lose your footing.
00:50The concept of balance is at the heart of the FOMC's statement on longer-run goals and monetary policy strategy.
00:57In the most recent update to the statement, the committee said that it would follow a balanced approach to promoting its goals during times when the objectives are not complementary,
01:06which is a pretty fair characterization of today's situation, with both inflation and unemployment under some pressure.
01:12We need to assess how much and for how long we are missing on each side of the mandate,
01:18and then determine which way policy should tilt to compensate for those misses.
01:23Applying this framework to the current economic environment, I remain concerned about high inflation and believe policy should be leaning against it.
01:31After last week's meeting, I see monetary policy as barely restrictive, if at all,
01:38and it's not obvious to me that monetary policy should do more at this time.
01:43But the future is inherently uncertain, and I'm watching developments closely.
Be the first to comment