john c williams : a tale of many economies remarks by mr john c williams, president and chief executive officer of the federal reserve bank of new york, at university at albany - suny, albany, new york, 11 july 2019. * * * as prepared for delivery thank you for that kind introduction and for having me to speak today. i ’ m an economist, so i naturally have a fascination with data, statistics, and what we can learn from them. but the reason i find economics so interesting isn ’ t the numbers or the charts — it ’ s how they shape the everyday lives of people. and that ’ s the reason running a federal reserve bank is such a privilege. the work we do — our public mission — plays a big role in helping people get jobs, take out mortgages, or grow their businesses. today i ’ m going to talk a bit about that work and the health of the economy — both at the national level and for this region, the federal reserve ’ s second district. before i go any further i need to give the standard fed disclaimer that the views i express today are mine alone and do not necessarily reflect those of the federal open market committee or others in the federal reserve system. i ’ ve just referred to the federal open market committee and the federal reserve system, but i know it ’ s not always entirely clear to people what they are, or what they do. the federal reserve has two monetary policy goals set by congress : keeping prices stable, and ensuring there are as many jobs in the u. s. as possible. underpinning both of these goals is a strong economy, and we use monetary policy to support that. a major part of monetary policy is setting interest rates, and we do this at federal open market committee — or fomc — meetings in washington, d. c. the federal open market committee consists of the presidents of the 12 federal reserve banks and the board of governors, who sit down as a group every six weeks to decide what interest rate will ensure sustainable growth. we don ’ t want the economy to grow so fast that it ’ s unsustainable, or so slowly that it discourages jobs and investment. just like goldilocks and her porridge, we don ’ t want it too hot or too cold — we want it just right. the macro outlook we make those decisions by examining a wide range of data and information. given that our goals are price stability and maximum employment,

that households and companies according to indicators are regaining confidence, have contributed to the nevertheless strong development. there has also been relatively little new housing built in recent years, at least in relation to demand. the housing market is what one might call “ regionally segregated ” and migration to metropolitan areas has put upward pressure on house prices in these areas. prices have also increased by far the most in stockholm, goteborg and malmo. and then we do not have the same element of speculation in the swedish housing market as in, for instance, australia and to some extent the united kingdom. what i mean here is the phenomenon that households buy housing as a financial investment and then rent it out, which may contribute to imbalances building up. this type of activity is not profitable in sweden in the same way. there are several reasons for this, but the most important ones are probably the tax system and rent legislation. in sweden we usually buy a house to live in rather than as a financial asset. however, having said this i would nevertheless like to say a word of caution. it is quite right to wonder whether the developments in recent years are actually sustainable. households ’ debts in relation to incomes peaked at around 120 per cent in connection with the crisis in the 1990s. today this figure is almost 170 per cent! also at the beginning of the 1990s many models and fundamental driving forces behind house price developments pointed to there not being a serious over - valuation in the property market. nevertheless prices fell in many areas by around 30 per cent! such a development could affect the real economy and thereby also the conditions for monetary policy. untenable in the long run although i cannot see any problems right now, i do not believe that nominal house prices can continue to increase by an average of well above 7 per cent a year as they have done since the start of the 2000s. this is not sustainable in the long term. and when we now consider when is the best time to begin raising the repo rate, my colleagues and i will be carefully examining variables such as house prices and lending. as i pointed out, for instance, in connection with the monetary policy meeting in february, i believe that during the interest rate increase phase ahead of us it might be appropriate to “ lean against the wind ” – to emphasise some concern by raising the repo rate slightly sooner than we might otherwise have done. but as i also said then, monetary policy is not the most effective means if one wishes to slow down, for