William C Dudley: "US Economy in a Snapshot"
Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal
Reserve Bank of New York, at the Economic Press Briefing on the US Economy in a Snapshot,
Federal Reserve Bank of New York, New York City, 19 May 2016.
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Jonathan McCarthy, Paolo Pesenti, Robert Rich and Joseph Tracy assisted in preparing these remarks.
Welcome to our Economic Press Briefing. Today we are going to introduce you to a data
product that we have been making available to the public, U.S. Economy in a Snapshot. My
role is to put this product in the broader context of the Federal Open Market Committee's
(FOMC) communication strategy about the economy and policy. My colleague Robert Rich will
then walk you through the structure of the product and discuss excerpts from the May release.
As always, what I have to say reflects my own views and not necessarily those of the Federal
Open Market Committee or the Federal Reserve System.
Conventional U.S. monetary policy is conducted by targeting the level of the federal funds
rate-an overnight interest rate on bank reserves. Few participants in our economy have any
direct interaction with this interest rate. How, then, is controlling this interest rate such an
important part of setting monetary policy and steering an 18 trillion dollar economy toward the
Federal Reserve's dual mandate objectives of maximum sustainable employment and price
stability?
This is the remarkable aspect of monetary policy. Just as a pebble dropped into a lake disturbs
the water not just at the point of impact but ripples outward far from the origin, changes in the
federal funds rate influence the prices of financial assets more broadly and this, in turn, affects
the broader economy. An important insight of modern monetary theory is that this transmission
of monetary policy to the broader economy through its many channels works best when the
central bank is transparent about its goals, policy strategy and approach to implementing its
strategy. In this case, market participants and households both understand and can anticipate
actions by the central bank. By doing so, the transmission channels of monetary policy are
enhanced. This places considerable importance on effective central bank communication.
Recognizing this, the FOMC has undertaken many initiatives over the years to improve its
communications with the public. These include providing clarification in terms of the goals of
monetary policy, discussions of the FOMC's broad policy strategy, as well as FOMC
participants' ongoing explanations of their views on monetary policy. As part of this effort, I
provide a comprehensive update on my outlook for the economy and monetary policy several
times during the year. Once a year we publish our staff's judgmental economic forecast. We
have also provided in the Liberty Street Economics blog discussions of an internal staff
modelbased economic forecast. In addition, we now regularly release our real-time forecast of
"current quarter" real GDP growth. All of these help the public to understand our assessment
of economic conditions through the lenses of these different types of forecasts.
When asked about the trajectory for the monetary policy stance, I always point out that it is
data dependent. The FOMC calibrates the stance of monetary policy to best achieve our twin
objectives of price stability and maximum sustainable employment, taking into account our
forecast for how the economy is evolving. This forecast reflects the ongoing flow of the data.
Data releases that are close to our expectations have little additional impact on the forecast,
while data releases that deviate significantly from our expectations can lead to more significant
revisions of the forecast. It is, therefore, important for market participants and households to
be able to follow the data along with the FOMC and to understand how we are likely to interpret
and react to incoming data.
While market analysts readily have access to economic and financial data, this access is not
widely available to everyone. To help fill this information gap, for the past year we have been
making available on our website a monthly publication called U.S. Economy in a Snapshot.
This publication contains a set of key data charts as well as commentary by our staff
economists. The purpose is to provide interested readers easy access to clear and concise
presentations of important economic information. The associated commentary provides some
pertinent observations one might draw from the data.
Our goal is to provide information that helps households and businesses follow the data along
with the Fed. If people know more about how the economy is performing and how that is likely
to influence our actions, this should make it easier for us to achieve our twin objectives.
I will now turn it over to Rob to discuss the Snapshot in greater detail.