| Speaker | Time | Text |
|---|---|---|
| That makes it possible for home industry to be offloaded to Sears Roebuck and Piggly Wiggly grocery stores and so on. | ||
| The country was ready for this, and it got delayed for almost the entirety of Wilson's two terms. | ||
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Christopher Cox with his book, Woodrow Wilson, tonight at 8 p.m. Eastern on C-SPAN's QA. | |
| You can listen to QA and all of our podcasts on the C-SPAN Now app or wherever you get your podcasts. | ||
| Federal Reserve Chair Jerome Powell spoke about the state and future of the U.S. economy and plans moving forward for the nation's central bank during a conference in Washington, D.C. Thank you, Trevor, and good morning. | ||
| I'd like to add my welcome to everyone. | ||
| Thanks for being here. | ||
| Thomas Laubach's research and his broader support of the FOMC helped us better understand monetary policy, and it is fitting that this work will continue today in his name. | ||
| Thank you to the authors of the papers, to the discussants, and to our panel participants, and thank you also to Trevor and his team for organizing this conference. | ||
| A whole lot of work went into bringing us together. | ||
| As in our last review, the 2025 review consists of three key elements. | ||
| This conference, Fed listens events at the reserve banks around the country, and policymaker discussions and deliberations supported by staff analysis at a series of FOMC meetings. | ||
| In the current review, we will reconsider aspects of our strategic framework in light of the experience of the last five years. | ||
| We will also consider possible enhancements to the committee's policy communication tools regarding forecasts, uncertainty, and risks. | ||
| In 2012, the FOMC first codified our monetary policy framework in a document entitled The Statement on Longer Run Goals and Monetary Policy Strategy, which we refer to as the consensus statement. | ||
| The language in the opening paragraph, which has never changed, articulates our commitment to fulfilling our congressional mandate and to explaining clearly what we're doing and why. | ||
| That clarity reduces uncertainty, improves the effectiveness of our policy, and enhances transparency and accountability. | ||
| As chair, Ben Bernanke led the committee through the creation of that initial consensus statement, adopting a 2% inflation target, and outlining our approach to achieving our congressionally assigned dual mandate. | ||
| The framework laid out in that document broadly aligned with best practices for a flexible inflation-targeting central bank. | ||
| The structure of the economy evolves over time, and monetary policymakers' strategies, tools, and communications need to evolve with it. | ||
| The challenges presented by the Great Depression differ from those of the Great Inflation and the Great Moderation, which in turn differ from the ones we face today. | ||
| A framework should be robust to a broad range of conditions, but also needs to be updated periodically as the economy and our understanding of it evolve. | ||
| From 2012 to 2018, the FOMC voted at each January meeting to reaffirm the consensus statement in most years without substantive changes. | ||
| In 2019, we changed that practice, conducting our first ever public review and said that we would repeat such reviews at roughly a five-year interval. | ||
| There's nothing magic about a five-year pace. | ||
| We believe that frequency is appropriate to reassess structural features of the economy and to engage with the public, practitioners, and academics on the performance of our framework. | ||
| Several of our global peers have adopted similar approaches to their framework reviews. | ||
| At the time of the last review, we had been living for about a decade in a new normal characterized by proximity to the effective lower bound, with low interest rates, low growth, low inflation, and a very flat Phillips curve. | ||
| If I could capture that era with one statistic, it would be that the policy rate had been stuck at the lower bound for seven long years following the onset of the global financial crisis in late 2008. | ||
| After liftoff in December 2015, we were able to raise the policy rate only very gradually over a period of three years to a peak of just 2.4 percent. | ||
| Seven months later, we began reducing it, leaving the rate at 1.6 percent in late 2019, where it would be when the pandemic arrived a few months later. | ||
| Policy rates in other major advanced economies were even lower, in many cases below zero, and in all such economies, inflation regularly ran below its target. | ||
| The sense at that time was that when the economy next experienced even a mild downturn, we would be right back at the lower bound, probably for another extended period. | ||
| The post-financial crisis decade had demonstrated the pain that that could bring. | ||
| Inflation would likely decline in a weak economy, raising real interest rates as nominal rates are pinned at zero. | ||
| Higher real rates would further weigh on job growth and reinforce downward pressure on inflation and inflation expectations. | ||
| Reflecting these concerns, we adopted a policy to make up for persistent shortfalls from the inflation target, an approach that was common in the extensive literature on the risks associated with the lower bound. | ||
| Given the downside risks to employment and inflation from proximity to the lower bound and the need to anchor longer-term inflation expectations at 2 percent, we said that following periods in which inflation has been running persistently below 2 percent, we would likely aim to achieve inflation moderately above 2 percent for some time. | ||
| We also concluded that policy decisions would be informed by assessments of shortfalls rather than deviations from maximum employment. | ||
| The change to shortfalls was not a commitment to permanently forswear preemption or to ignore labor market tightness. | ||
| Rather, it signaled that apparent labor market tightness would not, in isolation, be enough to trigger a policy response unless the committee believed that, if left unchecked, it would lead to unwelcome inflationary pressure. | ||
| This change reflected our experience with long expansions that featured historically low unemployment amid low and stable inflation, suggesting that a policy approach that carefully probed for the maximum level of employment could bring about the benefits of a strong labor market without risking price stability. | ||
| In the years just prior to the pandemic, for example, unemployment was at multi-decade lows, while inflation ran below 2%. | ||
| By December 2019, estimates of the longer-run unemployment rate had fallen sharply. | ||
| The use of shortfalls acknowledged that a combination of low inflation and low unemployment does not necessarily pose an adverse trade-off for monetary policy. | ||
| The economic conditions that brought us close to the lower bound and drove the changes in our consensus statement were thought to be rooted in slow-moving global factors that were likely to persist for an extended period, at least until our next five-year review. | ||
| And that might well have been the case had the pandemic not intervened. | ||
| The idea of an intentional, moderate overshoot proved irrelevant to our policy discussions and has remained so through today. | ||
| There was nothing intentional or moderate about the global inflation that arrived a few months after we announced our changes to the consensus statement, and I acknowledged as much publicly in December 2021. | ||
| We fell back on the rest of the framework, which called for traditional inflation targeting. | ||
| Through the end of 2021, FOMC participants continued to forecast that inflation was likely to subside fairly quickly in 2022, with only a moderate increase in our policy rate. | ||
| That projection was consistent with other central banks with different frameworks and the vast majority of forecasters. | ||
| When the evidence showed otherwise, we hiked 525 basis points over a period of 16 months. | ||
| The most recent data suggests that 12-month PCE inflation was 2.2 percent in April, far below its 7.2 percent peak in 2022. | ||
| And in a welcome and historically unusual result, as this room knows, this disinflation has come without the sharp increase in unemployment that has often accompanied a campaign of rate hikes to reduce inflation. | ||
| The economic environment has changed significantly since 2020, and our review will reflect our assessment of those changes. | ||
| Longer-term interest rates are a good deal higher now, driven largely by real rates given the stability of longer-term inflation expectations. | ||
| Many estimates of the longer-run level of the policy rate have risen, including those in the summary of economic projections. | ||
| Higher real rates may also reflect the possibility that inflation could be more volatile going forward than during the intercrisis period of the 2010s. | ||
| We may be entering a period of more frequent and potentially more persistent supply shocks, a difficult challenge for the economy and for central banks. | ||
| While our policy rate is currently well above the lower bound, in recent decades we have cut the rate by about 500 basis points when the economy is in recession. | ||
| Although getting stuck at the lower bound is no longer the base case, it is only prudent that the framework continue to address that risk. | ||
| While the framework must evolve, some elements of it are timeless. | ||
| Policymakers emerged from the great inflation with a clear understanding that it was essential to anchor inflation expectations at an appropriately low level. | ||
| During the Great Moderation, well-anchored inflation expectations allowed us to provide policy support to employment without risking destabilizing inflation. | ||
| Since the Great Inflation, the U.S. economy has had three of its four longest expansions on record. | ||
| Anchored expectations played a key role in facilitating these expansions. | ||
| More recently, without that anchor, it would not have been possible to achieve a roughly 5 percentage point disinflation without a spike in unemployment. | ||
| Keeping longer-run inflation expectations anchored was a driving force behind establishing the 2 percent target in the 2012 framework. | ||
| Maintaining that anchor was a major consideration behind the changes in 2020. | ||
| Anchored expectations are critical to everything we do, and we remain fully committed to the 2 percent target today. | ||
| In the current review, the committee is engaged in discussions about what we have learned from the experience of the past five years. | ||
| We plan to complete consideration of specific changes to the consensus statement in coming months. | ||
| We are paying particular attention to the 2020 changes as we consider discrete but important updates reflecting what we have learned about the economy and the way those changes were interpreted by the public. | ||
| In our discussions so far, participants have indicated that they thought it would be appropriate to reconsider the language around shortfalls. | ||
| And at our meeting last week, we had a similar take on average inflation targeting. | ||
| We will ensure that our new consensus statement is robust to a wide range of economic environments and developments. | ||
| In addition to revising the consensus statement, we will also consider potential enhancements to our formal policy communications, particularly regarding the role of forecasts and uncertainty. | ||
| As we have been reviewing assessments of the 2020 framework and of policy decisions in recent years, a common observation is the need for clear communications as complex events unfold. | ||
| While academics and market participants generally have viewed the FOMC communications as effective, there is always room for improvement. | ||
| Indeed, clear communication is an issue even in relatively placid times. | ||
| A critical question is how to foster a broader understanding of the uncertainty that the economy generally faces. | ||
| In periods with larger, more frequent, or more disparate shocks, effective communication requires that we convey the uncertainty that surrounds our understanding of the economy and the outlook. | ||
| We will examine ways to improve along that dimension as we move forward. | ||
| So let me end by saying thank you again for being here. | ||
| We've been looking forward to us. | ||
| All of us have been looking forward to being with you today and having these conversations that will occur over the next two days. | ||
| These discussions will help broaden and deepen our thinking about these issues, and they're critical to the success of these reviews. | ||
| Thank you very much. | ||
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Next on C-SPAN's Q&A, former California Republican Congressman Christopher Cox, author of Woodrow Wilson, The Light Withdrawn, takes a critical look at the 28th President of the United States and his attitudes towards racial equality and women's suffrage. | |
| And then British Prime Minister Keir Starmer takes questions for members of the House of Commons during his weekly question time. | ||
| Later, President Trump talks about the importance of the strategic partnership between the U.S. and Saudi Arabia after a defense agreement was signed between the two nations. | ||
| C-SPAN, Democracy Unfiltered. | ||
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| Chris Cox, why would a long-time Republican congressman spend 14 years researching Woodrow Wilson? |