For release on delivery
9:10 a.m. EDT (8:10 a.m. CDT)
August 27, 2020
New Economic Challenges and the Fed's Monetary Policy Review
Remarks by
Jerome H. Powell
Chair
Board of Governors of the Federal Reserve System
at
"Navigating the Decade Ahead: Implications for Monetary Policy," an economic policy
symposium sponsored by the Federal Reserve Bank of Kansas City
Jackson Hole, Wyoming
(via webcast)
August 27, 2020
Thank you, Esther, for that introduction, and good morning. The Kansas City
Fed's Economic Policy Symposiums have consistently served as a vital platform for
discussing the most challenging economic issues of the day. Judging by the agenda and
the papers, this year will be no exception.
For the past year and a half, my colleagues and I on the Federal Open Market
Committee (FOMC) have been conducting the first-ever public review of our monetary
policy framework.1 Earlier today we released a revised Statement on Longer-Run Goals
and Monetary Policy Strategy, a document that lays out our goals, articulates our
framework for monetary policy, and serves as the foundation for our policy actions.2
Today I will discuss our review, the changes in the economy that motivated us to
undertake it, and our revised statement, which encapsulates the main conclusions of the
review.
Evolution of the Fed's Monetary Policy Framework
We began this public review in early 2019 to assess the monetary policy strategy,
tools, and communications that would best foster achievement of our congressionally
assigned goals of maximum employment and price stability over the years ahead in
service to the American people. Because the economy is always evolving, the FOMC's
strategy for achieving its goals-our policy framework-must adapt to meet the new
challenges that arise. Forty years ago, the biggest problem our economy faced was high
and rising inflation.3 The Great Inflation demanded a clear focus on restoring the
- 2 -
credibility of the FOMC's commitment to price stability. Chair Paul Volcker brought
that focus to bear, and the "Volcker disinflation," with the continuing stewardship of
Alan Greenspan, led to the stabilization of inflation and inflation expectations in the
1990s at around 2 percent. The monetary policies of the Volcker era laid the foundation
for the long period of economic stability known as the Great Moderation. This new era
brought new challenges to the conduct of monetary policy. Before the Great Moderation,
expansions typically ended in overheating and rising inflation. Since then, prior to the
current pandemic-induced downturn, a series of historically long expansions had been
more likely to end with episodes of financial instability, prompting essential efforts to
substantially increase the strength and resilience of the financial system.4
By the early 2000s, many central banks around the world had adopted a monetary
policy framework known as inflation targeting.5 Although the precise features of
inflation targeting differed from country to country, the core framework always
articulated an inflation goal as a primary objective of monetary policy. Inflation targeting
was also associated with increased communication and transparency designed to clarify
the central bank's policy intentions. This emphasis on transparency reflected what was
then a new appreciation that policy is most effective when it is clearly understood by the
public. Inflation-targeting central banks generally do not focus solely on inflation:
Those with "flexible" inflation targets take into account economic stabilization in
addition to their inflation objective.
- 3 -
Under Ben Bernanke's leadership, the Federal Reserve adopted many of the
features associated with flexible inflation targeting.6 We made great advances in
transparency and communications, with the initiation of quarterly press conferences and
the Summary of Economic Projections (SEP), which comprises the individual economic
forecasts of FOMC participants. During that time, then-Board Vice Chair Janet Yellen
led an effort on behalf of the FOMC to codify the Committee's approach to monetary
policy. In January 2012, the Committee issued its first Statement on Longer-Run Goals
and Monetary Policy Strategy, which we often refer to as the consensus statement. A
central part of this statement was the articulation of a longer-run inflation goal of
2 percent.7 Because the structure of the labor market is strongly influenced by
nonmonetary factors that can change over time, the Committee did not set a numerical
objective for maximum employment. However, the statement affirmed the Committee's
commitment to fulfilling both of its congressionally mandated goals. The 2012 statement
was a significant milestone, reflecting lessons learned from fighting high inflation as well
as from experience around the world with flexible inflation targeting. The statement
largely articulated the policy framework the Committee had been following for some
time.8
Motivation for the Review
The completion of the original consensus statement in January 2012 occurred
early on in the recovery from the Global Financial Crisis, when notions of what the "new
normal" might bring were quite uncertain. Since then, our understanding of the economy
- 4 -
has evolved in ways that are central to monetary policy. Of course, the conduct of
monetary policy has also evolved. A key purpose of our review has been to take stock of
the lessons learned over this period and identify any further changes in our monetary
policy framework that could enhance our ability to achieve our maximum-employment
and price-stability objectives in the years ahead.9
Our evolving understanding of four key economic developments motivated our
review. First, assessments of the potential, or longer-run, growth rate of the economy
have declined. For example, since January 2012, the median estimate of potential growth
from FOMC participants has fallen from 2.5 percent to 1.8 percent (see figure 1). Some
slowing in growth relative to earlier decades was to be expected, reflecting slowing
population growth and the aging of the population. More troubling has been the decline
in productivity growth, which is the primary driver of improving living standards
over time.10
Second, the general level of interest rates has fallen both here in the United States
and around the world. Estimates of the neutral federal funds rate, which is the rate
consistent with the economy operating at full strength and with stable inflation, have
fallen substantially, in large part reflecting a fall in the equilibrium real interest rate, or
"r-star." This rate is not affected by monetary policy but instead is driven by
fundamental factors in the economy, including demographics and productivity growth-
the same factors that drive potential economic growth.11 The median estimate from
- 5 -
FOMC participants of the neutral federal funds rate has fallen by nearly half since early
2012, from 4.25 percent to 2.5 percent (see figure 2).
This decline in assessments of the neutral federal funds rate has profound
implications for monetary policy. With interest rates generally running closer to their
effective lower bound even in good times, the Fed has less scope to support the economy
during an economic downturn by simply cutting the federal funds rate.12 The result can
be worse economic outcomes in terms of both employment and price stability, with the
costs of such outcomes likely falling hardest on those least able to bear them.
Third, and on a happier note, the record-long expansion that ended earlier this
year led to the best labor market we had seen in some time. The unemployment rate
hovered near 50-year lows for roughly 2 years, well below most estimates of its
sustainable level. And the unemployment rate captures only part of the story. Having
declined significantly in the five years following the crisis, the labor force participation
rate flattened out and began rising even though the aging of the population suggested that
it should keep falling.13 For individuals in their prime working years, the participation
rate fully retraced its post-crisis decline, defying earlier assessments that the Global
Financial Crisis might cause permanent structural damage to the labor market.
Laubach, and Williams (2017) and Lunsford and West (2019). See also the recent evidence in
LopezSalido and others (2020).
12
Both the experience following the Global Financial Crisis and the current situation drive this point home.
After the Global Financial Crisis, the Fed held the federal funds rate at the lower bound for seven years.
Thereafter, as the economy strengthened, the federal funds rate reached a peak just above 2 percent. By
comparison, the federal funds rate averaged a little more than 5 percent in the 1990s. And, at the onset of
the COVID pandemic, we quickly cut rates to the effective lower bound. But since the federal funds rate
was only about 1-1/2 percent before the pandemic-because that is what the economy required at that
time-our scope to reduce the federal funds rate was far less than in earlier recessions.
13
The labor force participation rate for prime-age individuals (those between 25 and 54 years old), which is
much less sensitive to the effects of population aging, has been rising over the past few years and continued
to increase in 2019. For a longer-run perspective, see the analysis presented in Aaronson and others
(2014).
- 6 -
Moreover, as the long expansion continued, the gains began to be shared more
widely across society. The Black and Hispanic unemployment rates reached record lows,
and the differentials between these rates and the white unemployment rate narrowed to
their lowest levels on record.14 As we heard repeatedly in our Fed Listens events, the
robust job market was delivering life-changing gains for many individuals, families, and
communities, particularly at the lower end of the income spectrum.15 In addition, many
who had been left behind for too long were finding jobs, benefiting their families and
communities, and increasing the productive capacity of our economy. Before the
pandemic, there was every reason to expect that these gains would continue. It is hard to
overstate the benefits of sustaining a strong labor market, a key national goal that will
require a range of policies in addition to supportive monetary policy.
Fourth, the historically strong labor market did not trigger a significant rise in
inflation. Over the years, forecasts from FOMC participants and private-sector analysts
routinely showed a return to 2 percent inflation, but these forecasts were never realized
on a sustained basis (see figure 3). Inflation forecasts are typically predicated on
estimates of the natural rate of unemployment, or "u-star," and of how much upward
pressure on inflation arises when the unemployment rate falls relative to u-star.16 As the
unemployment rate moved lower and inflation remained muted, estimates of u-star were
revised down. For example, the median estimate from FOMC participants declined from
- 7 -
5.5 percent in 2012 to 4.1 percent at present (see figure 4). The muted responsiveness of
inflation to labor market tightness, which we refer to as the flattening of the Phillips
curve, also contributed to low inflation outcomes.17 In addition, longer-term inflation
expectations, which we have long seen as an important driver of actual inflation, and
global disinflationary pressures may have been holding down inflation more than was
generally anticipated. Other advanced economies have also struggled to achieve their
inflation goals in recent decades.
The persistent undershoot of inflation from our 2 percent longer-run objective is a
cause for concern. Many find it counterintuitive that the Fed would want to push up
inflation. After all, low and stable inflation is essential for a well-functioning economy.
And we are certainly mindful that higher prices for essential items, such as food,
gasoline, and shelter, add to the burdens faced by many families, especially those
struggling with lost jobs and incomes. However, inflation that is persistently too low can
pose serious risks to the economy. Inflation that runs below its desired level can lead to
an unwelcome fall in longer-term inflation expectations, which, in turn, can pull actual
inflation even lower, resulting in an adverse cycle of ever-lower inflation and inflation
expectations.
This dynamic is a problem because expected inflation feeds directly into the
general level of interest rates. Well-anchored inflation expectations are critical for giving
the Fed the latitude to support employment when necessary without destabilizing
inflation.18 But if inflation expectations fall below our 2 percent objective, interest rates
- 8 -
would decline in tandem. In turn, we would have less scope to cut interest rates to boost
employment during an economic downturn, further diminishing our capacity to stabilize
the economy through cutting interest rates. We have seen this adverse dynamic play out
in other major economies around the world and have learned that once it sets in, it can be
very difficult to overcome. We want to do what we can to prevent such a dynamic from
happening here.
Elements of the Review
We began our review with these changes in the economy in mind. The review
had three pillars: a series of Fed Listens events held around the country, a flagship
research conference, and a series of Committee discussions supported by rigorous staff
analysis. As is appropriate in our democratic society, we have sought extensive
engagement with the public throughout the review.
The Fed Listens events built on a long-standing practice around the Federal
Reserve System of engaging with community groups. The 15 events involved a wide
range of participants-workforce development groups, union members, small business
owners, residents of low- and moderate-income communities, retirees, and others-to
hear about how our policies affect peoples' daily lives and livelihoods.19 The stories we
heard at Fed Listens events became a potent vehicle for us to connect with the people and
communities that our policies are intended to benefit. One of the clear messages we
heard was that the strong labor market that prevailed before the pandemic was generating
- 9 -
employment opportunities for many Americans who in the past had not found jobs
readily available. A clear takeaway from these events was the importance of achieving
and sustaining a strong job market, particularly for people from low- and moderate-
income communities.
The research conference brought together some of the world's leading academic
experts to address topics central to our review, and the presentations and robust
discussion we engaged in were an important input to our review process.20
Finally, the Committee explored the range of issues that were brought to light
during the course of the review in five consecutive meetings beginning in July 2019.
Analytical staff work put together by teams across the Federal Reserve System provided
essential background for each of the Committee's discussions.21
Our plans to conclude the review earlier this year were, like so many things,
delayed by the arrival of the pandemic. When we resumed our discussions last month,
we turned our attention to distilling the most important lessons of the review in a revised
Statement on Longer-Run Goals and Monetary Policy Strategy.
New Statement on Longer-Run Goals and Monetary Policy Strategy
The federated structure of the Federal Reserve, reflected in the FOMC, ensures
that we always have a diverse range of perspectives on monetary policy, and that is
certainly the case today. Nonetheless, I am pleased to say that the revised consensus
statement was adopted today with the unanimous support of Committee participants. Our
new consensus statement, like its predecessor, explains how we interpret the mandate
Congress has given us and describes the broad framework that we believe will best
promote our maximum-employment and price-stability goals. Before addressing the key
changes in our statement, let me highlight some areas of continuity. We continue to
believe that specifying a numerical goal for employment is unwise, because the
maximum level of employment is not directly measurable and changes over time for
reasons unrelated to monetary policy. The significant shifts in estimates of the natural
rate of unemployment over the past decade reinforce this point. In addition, we have not
changed our view that a longer-run inflation rate of 2 percent is most consistent with our
mandate to promote both maximum employment and price stability. Finally, we continue
to believe that monetary policy must be forward looking, taking into account the
expectations of households and businesses and the lags in monetary policy's effect on the
economy. Thus, our policy actions continue to depend on the economic outlook as well
as the risks to the outlook, including potential risks to the financial system that could
impede the attainment of our goals.
The key innovations in our new consensus statement reflect the changes in the
economy I described. Our new statement explicitly acknowledges the challenges posed
by the proximity of interest rates to the effective lower bound. By reducing our scope to
support the economy by cutting interest rates, the lower bound increases downward risks
to employment and inflation.22 To counter these risks, we are prepared to use our full
range of tools to support the economy.
22
See Caldara and others (2020).
With regard to the employment side of our mandate, our revised statement
emphasizes that maximum employment is a broad-based and inclusive goal. This change
reflects our appreciation for the benefits of a strong labor market, particularly for many in
low- and moderate-income communities.23 In addition, our revised statement says that
our policy decision will be informed by our "assessments of the shortfalls of employment
from its maximum level" rather than by "deviations from its maximum level" as in our
previous statement.24 This change may appear subtle, but it reflects our view that a
robust job market can be sustained without causing an outbreak of inflation.
In earlier decades when the Phillips curve was steeper, inflation tended to rise
noticeably in response to a strengthening labor market. It was sometimes appropriate for
the Fed to tighten monetary policy as employment rose toward its estimated maximum
level in order to stave off an unwelcome rise in inflation. The change to "shortfalls"
clarifies that, going forward, employment can run at or above real-time estimates of its
maximum level without causing concern, unless accompanied by signs of unwanted
increases in inflation or the emergence of other risks that could impede the attainment of
our goals.25 Of course, when employment is below its maximum level, as is clearly the
23
The analysis of how alternative strategies that succeed in reducing the frequency and/or severity of ELB
recessions can induce longer run beneficial effects on economic inequality is presented in Feiveson and
others (2020).
24
Italics added for emphasis. The 2012 statement noted that the Committee would mitigate "deviations" of
employment from the Committee's assessments of its maximum level, suggesting that the Committee
would actively seek to lower employment if it assessed that employment was above the Committee's
estimate of its maximum level. In practice, the Committee has not conducted policy in this way, but rather
has supported continued gains in the labor market.
25
In addition, because real-time estimates are highly uncertain, we no longer refer to estimates of the
natural rate of unemployment from the SEP in our consensus statement. Another reason for dropping this
reference is that the unemployment rate does not adequately capture the full range of experience in the
labor market. The SEP will continue to report FOMC participants' estimates of the longer-run level of the
unemployment rate, as such information remains a useful, albeit highly incomplete, input into our policy
deliberations.
case now, we will actively seek to minimize that shortfall by using our tools to support
economic growth and job creation.
We have also made important changes with regard to the price-stability side of
our mandate. Our longer-run goal continues to be an inflation rate of 2 percent. Our
statement emphasizes that our actions to achieve both sides of our dual mandate will be
most effective if longer-term inflation expectations remain well anchored at 2 percent.
However, if inflation runs below 2 percent following economic downturns but never
moves above 2 percent even when the economy is strong, then, over time, inflation will
average less than 2 percent. Households and businesses will come to expect this result,
meaning that inflation expectations would tend to move below our inflation goal and pull
realized inflation down. To prevent this outcome and the adverse dynamics that could
ensue, our new statement indicates that we will seek to achieve inflation that averages
2 percent over time. Therefore, following periods when inflation has been running below
2 percent, appropriate monetary policy will likely aim to achieve inflation moderately
above 2 percent for some time.
In seeking to achieve inflation that averages 2 percent over time, we are
not tying ourselves to a particular mathematical formula that defines the average. Thus,
our approach could be viewed as a flexible form of average inflation targeting.26 Our
decisions about appropriate monetary policy will continue to reflect a broad array of
considerations and will not be dictated by any formula. Of course, if excessive
inflationary pressures were to build or inflation expectations were to ratchet above levels
consistent with our goal, we would not hesitate to act.
The revisions to our statement add up to a robust updating of our monetary policy
framework. To an extent, these revisions reflect the way we have been conducting policy
in recent years. At the same time, however, there are some important new features.
Overall, our new Statement on Longer-Run Goals and Monetary Policy Strategy conveys
our continued strong commitment to achieving our goals, given the difficult challenges
presented by the proximity of interest rates to the effective lower bound. In conducting
monetary policy, we will remain highly focused on fostering as strong a labor market as
possible for the benefit of all Americans. And we will steadfastly seek to achieve a
2 percent inflation rate over time.
Looking Ahead
Our review has provided a platform for productive discussion and engagement
with the public we serve. The Fed Listens events helped us connect with our core
constituency, the American people, and hear directly how their everyday lives are
affected by our policies. We believe that conducting a review at regular intervals is a
good institutional practice, providing valuable feedback and enhancing transparency and
accountability. And with the ever-changing economy, future reviews will allow us to
take a step back, reflect on what we have learned, and adapt our practices as we strive to
achieve our dual-mandate goals. As our statement indicates, we plan to undertake a
thorough public review of our monetary policy strategy, tools, and communication
practices roughly every five years.
References
Aaronson, Stephanie, Tomaz Cajner, Bruce Fallick, Felix Galbis-Reig, Christopher
Smith, and William Wascher (2014). "Labor Force Participation: Recent
Developments and Future Prospects," Brookings Papers on Economic Activity,
Fall, pp. 197-275,
https://www.brookings.edu/wpcontent/uploads/2016/07/Fall2014BPEA_Aaronson_et_al.pdf.
Aaronson, Stephanie, Mary C. Daly, William Wascher, and David W. Wilcox (2019).
"Okun Revisited: Who Benefits Most from a Strong Economy?" Brookings
Papers on Economic Activity, Spring, pp. 333-75,
https://www.brookings.edu/wp-content/uploads/2019/03/Aaronson_web.pdf.
Altig, David, Jeff Fuhrer, Marc P. Giannoni, and Thomas Laubach (2020). "The Federal
Reserve's Review of its Monetary Policy Framework: A Roadmap," FEDS
Notes. Washington: Board of Governors of the Federal Reserve System,
August 27, https://doi.org/10.17016/2380-7172.2767.
Arias, Jonas, Martin Bodenstein, Hess Chung, Thorsten Drautzburg, and Andrea Raffo
(2020). "Alternative Strategies: How Do They Work? How Might They Help?"
Finance and Economics Discussion Series 2020-068. Washington: Board of
Governors of the Federal Reserve System, August,
https://doi.org/10.17016/FEDS.2020.068.
Bernanke, Ben S., Thomas Laubach, Frederic S. Mishkin, and Adam S. Posen (1999).
Inflation Targeting: Lessons from the International Experience. Princeton, N.J.:
Princeton University Press.
Bernanke, Ben S., and Frederic S. Mishkin (1997). "Inflation Targeting: A New
Framework for Monetary Policy?" Journal of Economic Perspectives, vol. 11
(Spring), pp. 97-116.
Blanchard, Olivier J., Eugenio M. Cerutti, and Lawrence Summers (2015). "Inflation and
Activity-Two Explorations and Their Monetary Policy Implications," IMF
Working Paper 15/230. Washington: International Monetary Fund,
https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Inflation-andActivity-Two-Explorations-and-their-Monetary-Policy-Implications-43377.
Board of Governors of the Federal Reserve System (2012). "Meeting of the Federal
Open Market Committee on January 24-25, 2012," transcript. Washington:
Board of Governors,
https://www.federalreserve.gov/monetarypolicy/files/FOMC20120125meeting.pdf.
--- (2018). "Federal Reserve to Review Strategies, Tools, and Communication
Practices It Uses to Pursue Its Mandate of Maximum Employment and Price
Stability," press release, November 15,
https://www.federalreserve.gov/newsevents/pressreleases/monetary20181115a.htm.
--- (2020a), Monetary Policy Report. Washington: Board of Governors, February,
https://www.federalreserve.gov/monetarypolicy/files/20200207_mprfullreport.pdf.
--- (2020b). Fed Listens: Perspectives from the Public, report. Washington: Board
of Governors, June,
https://www.federalreserve.gov/publications/files/fedlistensreport-20200612.pdf.
Caldara, Dario, Etienne Gagnon, Enrique Martínez-García, and Christopher J. Neely
(2020). "Monetary Policy and Economic Performance since the Financial Crisis,"
Finance and Economics Discussion Series 2020-065. Washington: Board of
Governors of the Federal Reserve System, August,
https://doi.org/10.17016/FEDS.2020.065.
Clarida, Richard H. (2019). "The Federal Reserve's Review of Its Monetary Policy
Strategy, Tools, and Communication Practices," speech delivered at the 2019 U.S.
Monetary Policy Forum, sponsored by the Initiative on Global Markets at the
University of Chicago Booth School of Business, held in New York, February 22,
https://www.federalreserve.gov/newsevents/speech/clarida20190222a.htm.
Crump, Richard, Christopher Nekarda, and Nicolas Petrosky-Nadeu (2020).
"Unemployment Rate Benchmarks," Finance and Economics Discussion Series
2020-072. Washington: Board of Governors of the Federal Reserve System,
August, https://doi.org/10.17016/FEDS.2020.072.
Daly, Mary C. (2020). "We Can't Afford Not To," speech delivered at the National Press
Club Virtual Event, Washington, June 15, available at
https://www.frbsf.org/ourdistrict/press/presidents-speeches/mary-c-daly/2020/june/we-cant-afford-not-to.
Duarte, Fernando, Benjamin K. Johannsen, Leonardo Melosi, and Taisuke Nakata (2020).
"Strengthening the FOMC's Framework in View of the Effective Lower Bound
and Some Considerations Related to Time-Inconsistent Strategies," Finance and
Economics Discussion Series 2020-067. Washington: Board of Governors of the
Federal Reserve System, August, https://doi.org/10.17016/FEDS.2020.067.
Feiveson, Laura, Nils Goernemann, Julie Hotchkiss, Karel Mertens, and Jae Sim (2020).
"Distributional Considerations for Monetary Policy Strategy," Finance and
Economics Discussion Series 2020-073. Washington: Board of Governors of the
Federal Reserve System, August, https://doi.org/10.17016/FEDS.2020.073.
Fernald, John G. (2015). "Productivity and Potential Output before, during, and after the
Great Recession," in Jonathan A. Parker and Michael Woodford, eds., NBER
Macroeconomics Annual 2014, vol. 29. Chicago: University of Chicago Press,
pp. 1-51.
--- (2018). "Is Slow Productivity and Output Growth in Advanced Economies the
New Normal?" International Productivity Monitor, vol. 35 (Fall), pp. 138-48.
Fuhrer, Jeff, Giovanni P. Olivei, Eric S. Rosengren, and Geoffrey M.B. Tootell (2018).
"Should the Federal Reserve Regularly Evaluate Its Monetary Policy
Framework?" Brookings Papers on Economic Activity, Fall, pp. 443-97,
https://www.brookings.edu/wp-content/uploads/2018/09/Fuhrer-et-al_Text.pdf.
Goodfriend, Marvin (2007). "How the World Achieved Consensus on Monetary Policy,"
Journal of Economic Perspectives, vol. 21 (Fall), pp. 47-68.
Gordon, Robert J. (2017). The Rise and Fall of American Growth: The U.S. Standard of
Living since the Civil War. Princeton, N.J.: Princeton University Press.
Hebden, James, Edward P. Herbst, Jenny Tang, Giorgio Topa, and Fabian Winkler
(2020). "How Robust Are Makeup Strategies to Key Alternative Assumptions?"
Finance and Economics Discussion Series 2020-069. Washington: Board of
Governors of the Federal Reserve System, August,
https://doi.org/10.17016/FEDS.2020.069.
Holston, Kathryn, Thomas Laubach, and John C. Williams (2017). "Measuring the
Natural Rate of Interest: International Trends and Determinants," Journal of
International Economics, vol. 108 (May, S1), pp. S59-75.
Lopez-Salido, David, Gerardo Sanz-Maldonado, Carly Schippits, and Min Wei (2020).
"Measuring the Natural Rate of Interest: The Role of Inflation Expectations,"
FEDS Notes. Washington: Board of Governors of the Federal Reserve System,
June 19, https://doi.org/10.17016/2380-7172.2593.
Lunsford, Kurt G., and Kenneth D. West (2019). "Some Evidence on Secular Drivers of
U.S. Safe Real Rates," American Economic Journal: Macroeconomics, vol. 11
(October), pp. 113-39.
Powell, Jerome H. (2018). "Opening Remarks: Monetary Policy in a Changing
Economy." In Federal Reserve Bank of Kansas City, ed., Changing Market
Structure and Implications for Monetary Policy: A Symposium Sponsored by the
Federal Reserve Bank of Kansas City, Jackson Hole, Wyo., August 23-25.
Kansas City, Mo.: FRB Kansas City, pp. 1- 18,
https://www.kansascityfed.org/~/media/files/publicat/sympos/2018/powell2018.pdf
?la=en.
--- (2019). "Opening Remarks: Challenges for Monetary Policy." In Federal
Reserve Bank of Kansas City, ed., Challenges for Monetary Policy: A
Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson
Hole, Wyo., August 22-24. Kansas City, Mo.: FRB Kansas City, pp. 1-16,
https://www.kansascityfed.org/~/media/files/publicat/sympos/2019/powell2019.pdf
?la=en.
Svensson, Lars E. O. (1999). "Inflation Targeting as a Monetary Policy Rule," Journal
of Monetary Economics, vol. 43 (June), pp. 607-54.
--- (2020). "Monetary Policy Strategies for the Federal Reserve," International
Journal of Central Banking, vol. 16 (February), pp. 133-93,
https://www.ijcb.org/journal/ijcb2002_3.pdf.
Volcker, Paul A. (2008). Interview by Donald L. Kohn, Lynn S. Fox, and David H.
Small (second day of interview), Federal Reserve Board Oral History Project,
Board of Governors of the Federal Reserve System. Washington: Board of
Governors, January 28,
https://www.federalreserve.gov/aboutthefed/files/paul-avolcker-interview-20080225.pdf.
Volcker, Paul A., and Toyoo Gyohten (1992). Changing Fortunes: The World's Money
and the Threat to American Leadership. New York: Crown.
Figure 1: Real-Time Projections of Longer-Run Real Gross Domestic Product Growth
Percent
2.50
2.25
2.00
1.75
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
FOMC Blue Chip CBO
Note: The Federal Open Market Committee (FOMC) data are quarterly, extend through June 2020, and are
median projections of longer-term normal; for 2015:Q1 and 2015:Q2, the data are central tendency midpoints. The
Blue Chip data are biannual, extend through March 2020, and are consensus projections for 6 to 10 years in the future.
The Congressional Budget Office (CBO) data are biannual, extend through July 2020, and are baseline projections
for the calendar year 10 years ahead.
Source: For FOMC, Summary of Economic Projections, available on the Board's website at
https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm; for Blue Chip, Wolters Kluwer, Blue Chip
Economic Indicators; for CBO, Congressional Budget Office (The Budget and Economic Outlook, 10-Year Economic
Projections).
Figure 2: Real-Time Projections of Longer-Run Federal Funds Rate
Percent
4.25
4.00