Federal Open Market Committee Member Quotes

posted in: Monetary Policy, Notes | 0

U.S. Federal Reserve Governor Lael Brainard at the New York Association for Business Economics

Risks not flashing red

“Eight years into the recovery, it is important to recognize that financial conditions can change rapidly and bear special vigilance. Nonetheless, risks to the U.S. financial system do not appear to be flashing red in the way they did in the run-up to previous downturns….In recent quarters, the balance of risks has become more favorable, the global outlook has brightened, and financial conditions have eased on net.”

Economic improvement expected to continue

“On balance, when assessing economic activity and its likely evolution, it would be reasonable to conclude that further removal of accommodation will likely be appropriate soon…There are good reasons to believe that the improvement in real economic activity will continue.”

Balance Sheet normalization approaching

“The time for a change in balance sheet policy is coming into clearer view as normalization of the federal funds rate approaches the range that can be considered “well under way”….balance sheet normalization should be associated with higher term premiums, which in turn, other things held equal, should be associated with higher long-term Treasury yields. ”

 

John C. Williams, President and CEO, Fed Reserve Bank of San Francisco on CNBC and at the Symposium on Asian Banking and Finance


A fully recovered US economy

“The U.S. economy has fully recovered from the global financial crisis and the ensuing recession. In fact, the U.S. economy is about as close to the Fed’s dual mandate goals as we’ve ever been.”

Fiscal Policy Unclear

“There’s a lot of uncertainty about fiscal policy. I’m not sure what’s going to happen in terms of tax policy, spending policy, healthcare reform, trade immigration, all those policies. There’s not a lot of clarity around that.”

There still are risks

“When you’re docking a boat, you don’t run it in fast towards shore and hope you can reverse the engine hard later on. That looks cool in a James Bond movie, but in the real world it relies on everything going perfectly and can easily run afoul. Instead, the cardinal rule of docking is: Never approach a dock any faster than you’re willing to hit it. Similarly, in achieving sustainable growth, it is better to close in on the target carefully and avoid substantial overshooting.”

The optimism may be excessive

“I think a lot of people, maybe stock market investors and others, have counted up all the positives and kind of ignored how do you pay for that and the negatives. I think there may be some excessive optimism in the U.S. around how this will affect the economy.”

Normalization expected to start later this year

“we’re committed to slowly shrinking the balance sheet with the same sort of widely telegraphed, gradual, and—frankly—boring modus operandi that we’ve adopted for normalizing conventional monetary policy….Based on my forecast, this will occur sometime later this year.”

 

Dallas Fed President Robert S. Kaplan on CNBC

Expect around 2 rate hikes

“I don’t want to put a specific number on it. If somebody says in the 2s, that sounds about right to me,”

On Tax Reform

“If it’s tax reform, I think that could be helpful. If it’s a tax cut financed by increasing the deficit, my concern is that may give a short-term bump to GDP growth, but not a sustainable bump to GDP.”

Gradual normalization

“I think that removal of accommodation should be done gradually and patiently”