Fed Press Conference March 2016 Notes

Keep this accommodative policy stance

“Our decision to keep this accommodative policy stance reflects both our assessment of the economic outlook and the risks associated with that outlook.”

Involuntary part time employment remains somewhat elevated

“there is still room for improvement: Involuntary part-time employment remains somewhat elevated, and wage growth has yet to show a sustained pickup.”

Economic growth appears to have picked up from the modest pace in 4Q

“The improvement in employment conditions so far this year has occurred as economic growth appears to have picked up from the modest pace seen in the fourth quarter of last year. ”

Financial market volatility has not resulted in changes to the baseline outlook

“Since the turn of the year, concerns about global economic prospects have led to increased financial market volatility and somewhat tighter financial conditions in the United States, although financial conditions have improved notably more recently. In addition, economic growth abroad appears to be running at a somewhat softer pace than previously expected. These unanticipated developments, however, have not resulted in material changes to the Committee’s baseline outlook. ”

Long run normal fed funds rate has been revised down

“Compared with the projections made in December, the median path is about 1/2 percentage point lower this year and next; the median longer-run normal federal funds rate has been revised down as well. In other words, most Committee participants now expect that achieving economic outcomes similar to those anticipated in December will likely require a somewhat lower path for policy interest rates than foreseen at that time. ”

Projections are not a “plan” for future policy

“I would like to underscore, however, that the participants’ projections for the federal funds rate, including the median path, are not a “plan” for future policy. Policy is not on a preset course. ”

We make our decisions on a meeting by meeting basis

“the Committee makes its decisions on a meeting-bymeeting basis and does not and need not decide on a likely future path for the federal funds rate. ”

Most participants do expect that rate increases will be appropriate over time

“Now, I guess, you asked me also what would we need to see to continue raising rates. And I think it’s worth pointing out here that the Committee, most participants do continue to envision that if economic developments unfold as they expect, that further increases in the federal funds rate will prove appropriate over time–most participants anticipate that–and that the pace will be gradual.”

Economy is now close to our maximum employment objective

“But given that the economy is now close to our maximum employment objective, you know, hopefully inflation is moving up by mentioned–as you mentioned, recent readings on inflation have moved up”

We’re not trying to engineer an overshoot of inflation

“I want to make clear that our inflation objective is 2 percent and we’re projecting a move back to 2 percent, and we are not trying to engineer an overshoot of inflation, not to compensate for past undershoots, so 2 percent is our objective. But it is a symmetric objective, and we certainly don’t seek to overshoot our objective”

Haven’t seen any significant uptick that will be lasting in core inflation

“I’m wary and haven’t yet concluded that we have seen any significant uptick that will be lasting in, for example, in core inflation. But we note–the Committee notes, as it did in December, that we continue to monitor development trends and developments closely. And that would include both the fact that recent inflation readings have been on the high side. ”

There is some evidence of a link in lower oil prices and higher consumer spending but as strong as it could be

” the average household in the United States with oil prices, where they are now, is probably benefiting around $1,000 a year. And some very detailed microdata that I’ve seen on household spending patterns suggest that there may be a linkage you would expect from reduced bill, you know, reduced amounts that people pay at the pump to other spending like eating out for restaurant meals and other things. But the aggregate data, you know, is not as strong as it–and spending is not as strong as it could be, given the decline. ”

Committee certainly feels that risks have diminished in recent weeks

“So, let me say that, in recent weeks, I think the Committee certainly thinks that risks to the outlook have diminished. Nevertheless, we continue to see risks, which we highlighted. Now, I would point out that we decided not to describe the balance of risks has weighted to the downside. So the Committee did not reach that judgment. And there is no collective judgment in this statement on whether the risks are balanced or not. My–we decline to make a collective assessment. You know, my guess is that some participants see them as balanced and some see them as weighted somewhat to the downside. ”

We know that inequality has been rising in the US

“That said, we know that inequality has been rising in the United States over many years, not just the last several but going back to the mid-80s. There has been downward pressure on real wage groups–on real wage gains for groups, particularly those that are less skilled and educated, and those longer-term trends that may be associated with a number of factors–technological change and globalization–have been a concern for many, many years, and that may be part of what you’re, we’re seeing expressed.”

This is a non-partisan organization

“Your second question concerned the political contributions. So, I want to start by saying that I’ve been involved for many years in the Federal Reserve System, and we are a nonpartisan, independent institution devoted to pursuing our congressionally-mandated objectives, and I have never seen political views in any way influence the policy judgments that are made inside the Federal Reserve. I want to say that emphatically. ”

We are not actively considering additional accommodation

“what I would like to make clear is that this is not actively a subject that we are considering or discussing. The Committee continues to feel that we are on a course where the economy is improving, and inflation is moving back up. And as I indicated, if events continue to unfold in that way, we are likely to gradually raise rates over time. Again, that’s not fixed in stone. We’ll watch how the economy behaves. We’re prepared to respond if things transpire differently. But we are not spending time actively debating and considering things we could do for additional accommodation and certainly not actively considering negative rates. We are looking at the experience in other countries, and I guess I would judge they seem to have mixed effects, you know, some positive and some negative things. ”

If we found ourselves in the unlikely situation where we needed accommodation we have other tools besides negative interest rates

“But look, if we found ourselves in the unlikely situation where we needed to add accommodation, we have a range of tools, and we know from the things we did in the past that we have a number of options with respect to the maturity, for example, of our portfolio, with respect to asset purchases or forward guidance that remain available to us that are tools we could turn to in the unlikely event that we need to add accommodation. So, negative rates is not something that we’re actively considering”