Powell on monetary policy

In a presentation at the 2019 SIEPR Economic Summit, Stanford Institute of Economic Policy Research, Federal Reserve Board Chair Jerome H. Powell reviewed the actions of the Federal Open Market Committee (FOMC) over the last ten years starting with the lowering of the federal funds rate to close to zero, forward guidance, and quantitative easing. He then discussed balance sheet normalization, forward guidance, the normalization of policy communication, and beyond normalization.

Powell concluded with comments on current conditions and the economic outlook: “Right now, most measures of the health and strength of the labor market look as favorable as they have in many decades. Inflation will probably run a bit below our objective for a time due to declines in energy prices, but those effects are likely to prove transitory. Core inflation, which is often a reliable indicator of where inflation is headed over time, is quite close to 2 percent. Despite this favorable picture, we have seen some cross-currents in recent months. With nothing in the outlook demanding an immediate policy response and particularly given muted inflation pressures, the Committee has adopted a patient, wait-and-see approach to considering any alteration in the stance of policy. Considering monetary policy more broadly, we are inviting thorough public scrutiny and are hoping to foster conversation regarding how the Fed can best exercise the precious monetary policy independence we have been granted. Our goal is to enhance the public's trust in the Federal Reserve--our most valuable asset.”