Esther George, Speech: Monetary Policy in a Supply Constrained Economy

“Across the spectrum of these supply constraints is growing concern about the persistence of these issues. As the efficiency of just-in-time production and global networks gives way to the accumulation of unproductive inventories and a preference for resiliency over efficiency, the damage could prove permanent. These effects are compounded by a war that has had a dramatic impact on global commodity markets and offers few signs of near-term resolution.”

‘Fed policymakers have emphasized a commitment to act expeditiously to restore price stability, and I expect that further rate increases could put the federal funds rate in the neighborhood of 2 percent by August, a significant pace of change in policy settings. Balance sheet reduction plans will also be underway as a tightening mechanism, with financial markets far more unsettled currently than in 2017, when the Fed last initiated a rundown in the size of its balance sheet. Communicating about our policy path to avoid introducing any further uncertainty can ensure progress in significantly reducing the size of the balance sheet and lessening the central bank’s footprint in financial markets. Evidence that inflation is clearly decelerating will inform judgments about further tightening.”