Philip Jefferson, Speech: On the Assessment of Current Monetary Policy

Inflation

“Since peaking last June, inflation has declined about 2.75 percentage points—with nearly all the step-down explained by falling energy prices and slowing food prices. The bad news is that there has been little progress on core inflation.”

“At its recent peak, total PCE inflation was 7 percent in June 2022. Currently, it is 4.2 percent in March 2023. Is inflation still too high? Yes. Has the current disinflation been uneven and slower than any of us would like? Yes.”

GDP

“Looking ahead, last quarter’s growth in consumer spending seems unsustainable. Indeed, after rising very steeply in January 2023, consumer spending ticked down in February and was flat in March. Moreover, I expect slower consumer spending growth over the remainder of the year in response to tight financial conditions, depressed consumer sentiment, greater uncertainty, and declines in overall household wealth and excess savings.”

Banking Crisis

“It is reasonable to expect that recent stress events will lead banks to tighten credit standards further. Even though it is too early to tell, my view is that these incremental credit restraints will have a mild retardant effect on economic growth because the recent bank failures were isolated and addressed swiftly by aggressive macro- and micro-prudential policy actions.

Jobs

“The national unemployment rate was 3.6 percent in March 2022 when the current monetary policy tightening cycle began. Today, after 500 basis points of tightening of the policy rate, the national unemployment rate stands at a near-record low of 3.4 percent.”