for release on delivery 11 : 00 a. m. edt june 23, 2022 the outlook for inflation and monetary policy remarks by michelle w. bowman member board of governors of the federal reserve system at executive officers conference massachusetts bankers association harwich, massachusetts june 23, 2022 thank you to the massachusetts bankers association for the opportunity to speak to you today. it is often good to get away from washington to gain some perspective, and it ’ s always worthwhile for me when i can get some perspective from bankers. i will touch on some of the banking issues i expect are on your minds, but one of the biggest issues for everyone right now is inflation, what the fed is doing to get inflation under control, and the implications for your businesses, your customers, and your communities. inflation is the highest we have seen in the united states in 40 years and so far it shows little sign of moderating. at the same time, the economy is growing at a moderate pace, and the labor market is extremely tight, as indicated by a variety of measures including reports of many employers unable to find workers despite significantly raising wages. that tightness is contributing to inflation, because labor is the largest input cost for producing goods and providing services. inflation is a significant challenge for everyone, but it hits lower - and moderate - income people the hardest, since they spend a larger share of their incomes on necessities and often have less savings to fall back on. inflation is also a burden for businesses that must somehow balance unpredictable costs while setting prices that aren ’ t so high that they discourage customers from purchasing. inflation that continues at these levels is a threat to sustained employment growth and to the overall health of the economy. the inflation data show that, after moderating slightly for a short time, price increases for motor vehicles have picked up again, energy prices rose sharply in may, and prices for food have risen more than 10 percent from a year ago. the inflationary effect from the invasion of ukraine has proven to be lasting for both energy and food - 2commodity prices, with little prospect of the conflict or those price pressures abating very soon. more broadly, global supply chain issues continue, in part because of the effect of ongoing covid - 19 lockdown policies in china that have slowed production and shipping. one important factor that we often point to in driving today ’ s spending decisions and inflation outlook are expectations of future inflation. near - term expectations tend to rise as current inflation increases

based upon a forward - looking assessment of the losses that would be suffered under hypothetical adverse economic scenarios, so that capital will be built and maintained at levels high enough for the firms to remain viable financial intermediaries even under such stressed conditions. in addition to the microprudential improvement that comes from substituting a dynamic for a static capital calculation, there is an important macroprudential motivation, reflected in the design of scenarios and the required levels of post - stress capital. the efficacy of the ccar process is substantially enhanced as the information systems and internal risk - management capacities of the firm improve. beyond this important, but discrete regulatory measure, well - developed processes for determining risk appetite give supervisors better insight into risks specific to the activities and strategic decisions of each firm. as a result, supervisors should be better able to identify points at which a firm ’ s risk - taking may diverge from that which is consistent with microprudential and macroprudential objectives. this, in turn, should permit more timely supervisory or regulatory responses. regulatory objectives and fiduciary duties the regulatory focus on risk in corporate governance will produce additional examples of each of the three kinds of measures i have just described. for instance, the office of the comptroller of the currency has recently proposed guidance for risk governance at large national banks. 16 still, particularly with an audience half composed of corporate law an mra is a supervisory finding that the federal reserve communicates to the firm and requires remediation. for more information, see board of governors of the federal reserve system, division of banking supervision and regulation ( 2013 ), “ supervisory considerations for the communication of supervisory findings, ” supervision and regulation letter sr 13 – 13 ( june 17 ). u. s. department of the treasury, office of the comptroller of the currency ( 2014 ), guidelines establishing heightened standards for certain large insured national banks, insured federal savings associations, and insured federal branches ; integration of regulations, 79 fed. reg. 4282 ( january 27 ). bis central bankers ’ speeches professors, it is natural to ask whether corporate law tools might usefully supplement regulatory measures. specifically, the question arises as to whether the fiduciary duties of the boards of regulated financial firms should be modified to reflect what i have characterized as regulatory objectives. doing so might make the boards of financial firms responsive to the broader interests implicated by their risk - taking decisions even where regulatory and supervisory measures had not anticipated