michael s barr : commencement remarks speech by mr michael s barr, vice chair for supervision of the board of governors of the federal reserve system, at the american university school of public affairs graduation ceremony, washington dc, 10 may 2024. * * * congratulations, class of 2024! let me also congratulate your families, friends, teachers, mentors, and everyone else who believed in you and supported you on the path that brought you here today. thank you, president burwell, provost wilkins, and dean jacknowitz. before i came to the federal reserve, i led the gerald r. ford school of public policy at the university of michigan for five years, so i am used to addressing public policy graduates in may, wearing a robe, and praying it won't rain for the afterparty. or in michigan, hail! it is an honor to be able to join in this celebration of you completing your studies and entering a new and exciting stage of your lives. this is particularly special to me, as later in life my mom went back to school at american university ( au ) to earn her master's in education. today, may 10, would have been her birthday - so i can celebrate your path forward and honor her memory. i had a chance to speak with a few of your classmates last week, and they gave me a window into the passion and commitment that you bring to your work. it is easy right now for some to look at the world and be cynical about the possibility of making it a better place. but in so many ways, the world is a much better place than it was 50 or 100 years ago, in large part thanks to people like you who've gone into public policy. in my personal experience, i've seen many things get better over the course of my professional lifetime. i can see it now in the work that we do at the federal reserve. and most importantly, i can see it in each of you. sometimes, it's easy to look at the government or a large corporation or even the nonprofit sector and see some large, distant kind of entity. but the government is made up of individual human beings. you, your friends and your colleagues, your predecessors here at au, and the people who will come after you. those individuals make a big difference. and that's true the moment you leave school. early on, for example, i worked as a special assistant for bob rubin when he

are stable, which bolsters the inference that the economy has not entered a situation of steadily rising inflation. most economic forecasts point to a gradual approach toward full utilization of the productive capacity of the economy. commodity, energy, and import prices are unlikely to continue moving up at the speed of recent quarters. productivity growth is still strong. and elevated profit margins are available to absorb increases in unit labor costs for a while. as a result, inflation is most likely to remain at levels consistent with a continuation of effective price stability. that said, the federal funds rate cannot be held at its current level indefinitely if price stability is to be preserved. the very accommodative stance of policy - including both the low level of the funds rate and the fomc ’ s indications that it was intending to hold it at that level for a while - was put in place to counter unusually weak demand and declining inflation. circumstances have changed and policy will respond. the challenge we face is to remove the accommodation in such a way as to foster both the return to full employment and the maintenance of price stability. because i believe that the rise in inflation will be limited and because i agree that growth of output is likely to only moderately exceed the growth of the economy ’ s potential, i supported the fomc ’ s assessment at its last meeting that accommodation likely can be removed at a pace that is likely to be measured. but experience counsels caution. there is much about the inflation process that we do not understand, and i have been surprised at the extent of the pickup in core inflation this year. moreover, measures of inflation expectations will require careful scrutiny as we move forward. an examination of the variables believed to proxy for aggregate demand and potential supply can help to explain inflation and to forecast future price developments, and the concepts are integral to making monetary policy. but given our limited understanding of price determination, we must also keep a close watch on actual inflation outcomes. it took about twenty years to undo the effects on economic behavior of the inflationary episode of the 1970s. we must preserve those gains if we are to meet our responsibilities for fostering economic growth and stability.