Michelle Bowman, Speech: Forward Guidance as a Monetary Policy Tool, Considerations for the Current Economic Environment

Inflation & Fed Funds: “At this point, for me, it comes down to what the incoming data and other economic information will tell us about the outlook for inflation. If we do not see signs that inflation is moving down, my view continues to be that sizable increases in the target range for the federal funds rate should remain on the table. However, if inflation starts to decline, I believe a slower pace of rate increases would be appropriate. To bring inflation down in a consistent and lasting way, the federal funds rate will need to move up to a restrictive level and remain there for some time. However, it is not yet clear how high we will need to raise the federal funds rate and how much time will pass before we begin to see inflation moving back down in a consistent and lasting way.”

Forward Guidance: “Forward guidance is official FOMC communication that is intended to signal to the public the likely future path of monetary policy … The intent of all forward guidance is to influence the public’s expectations about the FOMC’s future monetary policy actions, and in doing so, affect longer-term interest rates and broader financial conditions to help support a path for inflation and economic activity that would be consistent with accomplishing t the Committee’s price-stability and maximum-employment goals.”