Jerome Powell: Opening remarks - Research and Statistics
Centennial Conference
Opening remarks by Mr Jerome H Powell, Chair of the Board of Governors of the
Federal Reserve System, at "A Look at the Past, Present, and Future", a conference
celebrating the Centennial of the Division of Research and Statistics (R&S), Board of
Governors of the Federal Reserve System, Washington DC, 8 November 2023.
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Thank you, Stacey, for the chance to be part of this celebration. It is great to be here to
honor the Division of Research and Statistics (R&S) and humbling to see so many Fed
people who served the institution over long and distinguished careers and have
returned for this great occasion. The Fed is one of those places where you can work for
a decade or so and still feel like a newbie.
For those listening outside this room, I will briefly outline R&S's responsibilities. A large
part of the division, along with other divisions at the Board, is engaged in producing the
Tealbook, which contains the staff's forecast for the U.S. economy, as well as a great
deal of data and analysis on financial and economic issues, and which is delivered to
the Federal Open Market Committee (FOMC) before our meetings.
Outside of the FOMC meeting cycle, R&S deploys its experts wherever they are
needed across the Board, providing crucial inputs to work on financial stability, bank
merger analysis, and many other topics. R&S is also an ongoing source of specialized
information for policymakers. If Board members have questions about even the most
arcane workings of some aspect of the economy, they can send an email and, in no
time, be sitting down with some of the best-informed experts on that subject. Much of
the time, these are R&S economists. During the pandemic, when questions arose about
how the computer chip shortage was affecting auto production or how businesses were
responding to the backlog at U.S. ports, R&S gave detailed briefings on these topics.
Among its other activities, the Board of Governors is one of the world's most productive
economic research institutions, and a large share of that work takes place inside R&S,
supporting our mission of promoting a healthy economy and a strong and stable
financial system.
I've spoken about research-now let me turn to statistics. In addition to the gathering of
data from many sources outside the Federal Reserve, R&S is itself the source for some
of the most important data on the economy and the financial system. Our consumer
credit data provide financial markets and the public with a vital indicator of the strength
of household spending and balance sheets. Each month, the Industrial Production
report gives us insights into how well certain sectors of the economy, especially in the
manufacturing realm, are operating. R&S is also responsible for the Financial Accounts
of the United States, a quarterly compendium of assets, liabilities, and transactions for
different segments of the economy. And every three years, R&S conducts the Survey of
Consumer Finances, a premier source of detail and insights about how households are
faring in the economy. The latest survey was published just last month. These and
other data series produced by R&S are a significant public service.
I want to focus in more detail on the forecast, perhaps the most important of R&S's
roles. The U.S. economy baseline forecast produced by R&S, along with the simulation
of a half-dozen plausible alternative paths, constitutes the largest part of the essential
bedrock that enables our pursuit of our dual-mandate goals.
Some people are attracted to extremely challenging tasks. The people of R&S are
those people, having chosen such a task in forecasting the path of the U.S. economy,
eight times a year for FOMC meetings, with ongoing updates between meetings. They
do this work on the biggest stage and with the highest stakes, knowing that the
economy very often surprises us.
Several qualities are required to do this work well.
I will start with an intense commitment. The work requires everything you have to give.
You have to love this work to do it well.
The job also requires integrity-policymakers count on R&S to give us their best thinking,
not shading the results for any reason.
Regular forecasting also demands a systematic approach and a high degree of
intellectual rigor. Ask Stacey and her colleagues to explain a certain aspect of the
forecast, and you will find that they have a clear explanation grounded in a rigorous
framework.
That intellectual rigor has to be combined with flexibility and agility. Economic models
can do a reasonably good job of capturing the working of the economy over past
decades. Of course, even with state-of-the-art models and even in relatively calm times,
the economy frequently surprises us. But our economy is flexible and dynamic, and
subject at times to unpredictable shocks, such as a global financial crisis or a
pandemic. At those times, forecasters have to think outside the models.
This work also takes large doses of courage and humility. And, finally, judgment. To
complement this rigorous process, there has to be good judgment, based on knowledge
and experience.
Perhaps the most important legacy of the past century for the Division of Research and
Statistics is the resilience, the creativity, the energy, the rigor, and the commitment with
which R&S has risen to the many challenges it and our country have faced in that span
of history. On behalf of the Board and the FOMC, thank you for that, and hearty
congratulations on your first 100 years of service to the public.