Lisa Cook, Speech: The U.S. Economic Outlook and Monetary Policy

Inflation

“Even so, several factors are likely to contribute to disinflation. Long-term inflation expectations remain well anchored, and shorter-term expectations have retraced much of last year’s rise. Rent increases on new leases have slowed sharply over the past six months, which should begin to pull down measured housing-services inflation over the course of this year. Moreover, significant supply of multifamily housing is coming online, which should take further pressure off the rental market.”

“Another potential source of disinflation is that wage growth has moderated somewhat, even as the labor market remains very strong by most measures.”

Monetary Policy

I approach all our monetary policy discussions with the same mindset:

Be prepared to adjust the outlook based on incoming data while being humble about our ability to draw firm conclusions and thus not overreacting to a few data points.

Seek out useful data sources, including high-frequency data that may better capture evolving economic developments.

And follow a risk-management approach that considers not only the expected outcomes, but also various risks to the outlook.

Fed Funds

“Going forward, I am weighing the implications of stronger momentum in the economy against potential headwinds from recent developments. On the one hand, if tighter financing conditions restrain the economy, the appropriate path of the federal funds rate may be lower than it would be in their absence. On the other hand, if data show continued strength in the economy and slower disinflation, we may have more work to do.”

25bps or 50bps

“The FOMC has been raising rates in smaller increments as we seek a sufficiently restrictive monetary policy stance to return inflation to 2 percent over time. By taking smaller steps, we can observe economic and financial conditions and consider the cumulative effects of our policy actions.”