Speech
Annotation
A speech by Federal Reserve Bank Governor Lael Brainard at the New York Association for Business Economics, New York, New York. May 30, 2017
Annotations by Editor P.J. O’Rourke Match number with speech annotation.
1. In a muddy sort of way... GDP growth rates have
For the first time in many years, we are seeing signs of synchronized economic expansions at home and abroad, and the balance of risks globally has become more positive. Recent data suggest that the underlying momentum of the domestic expansion remains solid. 1 While U.S. consumption was weak in the first quarter of 2017, the data so far are consistent with a rebound in the current quarter. Moreover, financial conditions remain supportive of continued economic expansion despite some recent volatility. 2 The ongoing progress in bringing Americans back into productive employment is especially heartening. 3 With continued strength in the labor market, economic activity regaining momentum, and a brighter outlook abroad, it would be appropriate soon to see the federal funds rate moving closer to its neutral level. If the economy evolves in line with the March Summary of Economic Projections (SEP) median path, normalization of the federal funds rate is likely to be well underway before too long, setting the stage for a gradual and predictable running off of the balance sheet. 4 Even so, I see some tension between signs that the economy is in the neighborhood of full employment 5 and indications that the tentative progress we had seen on inflation may be slowing. 6 If the tension between the progress on employment and the lack of progress 7 on inflation persists, it may lead me to reassess the expected path of the federal funds rate in the future, although it is premature to make that call today.
been falling for the past two quarters.
2. Of which there's been none. Volatility, measured by the VIX, is at all-time lows. It slipped into single digits the day before Gov. Brainard gave her speech.
3. Not! Labor force
participation is down to 62.7%, the lowest rate since the 1970s.
4. Yard sale at the Fed!
5. Number of folks “not in
the labor force” is hitting all-time highs. It's not even the same city, much less neighborhood.
6. “Progress”? Since when does increased inflation make things better for people? The Consumer Price Index has gone up 2.2% in the past year with double-digit inflation on gas, 3.5% inflation on
shelter, and 3.1% inflation on healthcare. You call that progress?
Different Signals from the Labor Market and Inflation
7. There's that “progress”
again. Even with a seemingly low 2.2% annual inflation rate, a dollar will lose half its value over the next 30 years.
Let me start by reviewing the conflicting readings we are getting from the labor market and from inflation.
American Consequences | 37
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