Charles Evans, Speech: Going the Distance on Inflation Redux

“I see the nominal funds rate rising to a bit above 4-1/2 percent early next year and then remaining at this level for some time while we assess how our policy adjustments are affecting the economy.”

“Our rapid pace of rate increases has fast-tracked our arrival to such a restrictive stance. Front-loading was a good thing, given how far below neutral rates were. But overshooting is costly, too, and there is great uncertainty about how restrictive policy must actually become. This puts a premium on the strategy of getting to a place where policy can plan to rest and evaluate data and developments.”

“Indeed, even though rate hikes didn’t begin until March, the information in the SEPs and other Fed communications likely assisted in substantially tightening financial conditions by mid-year, and did so without the large dislocations in financial flows that have at times accompanied past changes in the trajectory of policy. And given how quickly financial conditions reacted to our policy communications, perhaps we have shortened one leg of the long and variable lags of the monetary transmission mechanism.”