randal k quarles : goodbye to all that - the end of libor speech by mr randal k quarles, vice chair for supervision of the board of governors of the federal reserve system, at the structured finance association conference, las vegas, nevada, 5 october 2021. * * * now that business travel has started to pick back up as we emerge from the covid event, a prosaic but insistent problem has reappeared : what to read on a long plane flight. like most of you, i try to get some work done — but, also like most of you, out of an amalgam of security concerns and indolence, i often don ’ t succeed. something must improve the hours, but kant is a little heavy, p. g. wodehouse a little light, and t. s. eliot looks like you ’ re just showing off. so, over the last few weeks, i ’ ve been re - reading joan didion while making my way from point a to point b : slouching toward bethlehem, the white album, and where i was from. as it turns out, joan didion is a particularly apt author to be reading on the way to this conference — not because the conference is being held in las vegas, although her four - page summation of this “ most extreme and allegorical of american settlements ” is a classic. but rather, because a nearly constant theme of her writing is change : how hard it is to recognize that things have changed ; how hard it is to come to terms with it once recognized ; how insistent people can be that surely, they will be ok. and given that introduction, i ’ m sure you have now guessed what i intend to talk to you about today : libor, the benchmark formerly known as the london interbank offered rate. libor was the principal benchmark used to set interest rates for a vast number of commercial loans, mortgages, securities, derivatives, and other products. for a number of years — certainly at least since july of 2017, and really for several years before — it has been clear that libor would end, but some believed it was not clear exactly when libor would end. and, as a result, many market participants have continued to use libor as if that end date would surely be in some indefinitely distant future, as if libor would remain available forever. earlier this year, however, things changed, and changed significantly. two things

few minutes one of you will ask not about what we did at our last meeting, but rather what we are going to do at the next one. i can't answer that question because, as i have emphasized in the past, we simply do not know. the world is an uncertain place, and all monetary policymakers can really be sure of is that what will happen is often different from what we currently expect. that is why the committee has indicated that its policy decisions will be data dependent. that is, we will adjust policy appropriately in light of economic and financial events to best foster conditions consistent with the attainment of our employment and inflation objectives. as you know, in making our policy decisions, my fomc colleagues and i spend considerable time assessing the incoming economic and financial information and its implications for the economic outlook. but we also must consider some other issues, two of which i would like to mention briefly today. first, should we be concerned about the possibility of the unemployment rate falling somewhat below its longer - run normal level, as the most recent fomc projections suggest? in my view, a modest overshoot of this sort would be appropriate in current circumstances for two reasons. first, other measures of labor market conditions - - such as the fraction of workers with part - time employment who would prefer to work full time and the number of people out of the labor force who would like to work - - indicate that more slack may remain in labor market than the unemployment rate alone would suggest. second, with inflation currently well below 2 percent, a modest overshoot actually could be helpful in moving inflation back to 2 percent more rapidly. nonetheless, a persistent large overshoot of our employment mandate would risk an undesirable rise in inflation that might require a relatively abrupt policy tightening, which could inadvertently push the economy into recession. monetary policy should aim to avoid such risks and keep the expansion on a sustainable track. in this context, i would point out that at our january meeting, we reaffirmed our statement on longer - run goals and monetary policy strategy with an adjustment to clarify that our inflation goal is symmetric. 4 that is, the committee would be concerned if inflation were running persistently above or below our objective. in my view, even if inflation was expected to return to 2 percent over time, persistent deviations from our goal in either direction could cause economic harm and could ultimately unmoor longer - term inflation expectations. of course, whether the committee would take action to address