00:00I think that monetary policy right now is barely restrictive if at all. I think we're pretty close to the neutral rate
00:07My estimate of neutral is higher than you know
00:11It's towards that higher end of the range that's published in the summary of economic projections or the dot plot as people like to call it
00:18And I base that on a couple of things. I look at I
00:22Look at the theoretical models and my colleague John Williams has you know part of the seminal
00:27Model the law back Williams model for our star
00:31That estimate if you look in the law back Williams model has been trending upwards over the past several years
00:36I look at how the economy has been performing. So one of the things we say about
00:41Our star the neutral rate is we'll know it by its works
00:44When I look at how the economy is performed I see spending continuing to be reasonably strong
00:49Consumption is good the GDP numbers are healthy. That doesn't feel to me like an economy that has a
00:55Overly restrictive set of policies and then when I look at financial conditions and the markets they look
01:02You know pretty accommodative and so balancing all of those things together
01:06It seems to me likely that the neutral rate has been rising
01:10Over the recent past if you look not just at the law back Williams model
01:14But we have one of our economists in the Cleveland Fed has put forward his own model
01:18For star variables our star you star and a variety of others of them and that also has been trending upwards those models both
01:27Saeed Zaman's and and the love of Williams model have it around three point four three point five percent is what comes out of those
01:34But that's risen a good amount since a number of years ago kind of pre pandemic coming out of the global financial crisis
01:41And so it seems to me likely that
01:46To maintain a restrictive stance of policy
01:48We need to keep rates around these levels and when I look at the overall performance of the economy
01:53It's not obvious that monetary policy should be doing more right now
01:58I think we still want to make sure we've got some restriction to bring inflation back to target and as we talked about the labor market to me seems broadly in balance
02:05Definitely some places to watch and if I see more material weakening on the employment side that would shift my viewpoints
02:13But right now I see persistence in
02:16Inflation we've been above our target for four and a half years my
02:20Forecast would have us staying above a target for another two to three years
02:25So if you add that all together, it's going to be the better part of the decade that we've missed on our inflation side of our mandate
02:31And so I think to maintain our credibility, it's important that we continue to work to bring that down
Be the first to comment