( san francisco : federal reserve bank of san francisco, june ), https : / / www. frbsf. org / economic - research / publications / economic - letter / 2022 / june / how - much - do - supplyand - demand - drive - inflation. - 7has raised the federal funds rate three times for a cumulative 150 basis points. this is the fastest pace of tightening in close to 30 years. at our last meeting, we raised the policy rate by 75 basis points, which is a large move by historical standards. that size increase was not an over - reaction to one data point on inflation — it was primarily the response to a sequence of excessively high inflation readings since the beginning of the year. it was appropriate given the lack of progress on inflation and clearly signals the fomc ’ s commitment to get inflation under control as soon as possible. the response of financial markets to the fomc ’ s policy actions and communications indicate to me that the committee retains the credibility and the public confidence that is needed to make monetary policy effective. longer - term interest rates have moved up to levels not far from those reflected in committee members ’ estimates of the final destination for the federal funds rate in this tightening cycle, effectively implementing policy ahead of time. the average rate for a 30 - year conforming fixed rate home mortgage has increased by more than two percentage points since the end of 2021. while there is some slowdown in home sales, lenders and borrowers are still doing business at these rates, which indicates that they believe the fomc ’ s policy intentions are credible, as broadly reflected in the interest rate paths in the summary of economic projections ( sep ). as i have said before, with inflation so high, there is a virtue in front - loading tightening so that policy moves as soon as is practical to a setting that restricts demand. getting there sooner will bolster the public ’ s confidence that we can get inflation down and it will preserve options for adjusting the pace of tightening later if needed. - 8with this view, it should not be surprising that looking toward the fomc ’ s next meeting july 26 - 27, and with the cpi data in hand, i support another 75 - basis point increase, bringing the target range for the federal funds rate to 2 - 1 / 4 to 2 - 1 / 2 percent before august. i judge that level is close to neutral, by which i mean a level that neither stimulates nor restrict

about the prospects for the specific companies that make up our broad stock price indexes. if episodic recurrences of ruptured confidence are integral to the way our economy and our financial markets work now and in the future, it has significant implications for risk management and, by implication, macroeconomic modeling and monetary policy. probability distributions that are estimated largely, or exclusively, over cycles excluding periods of panic will underestimate the probability of extreme price movements because they fail to capture a secondary peak at the extreme negative tail that reflects the probability of occurrence of a panic. furthermore, joint distributions estimated over periods without panics will misestimate the degree of correlation between asset returns during panics. under these circumstances, fear and disengagement by investors often result in simultaneous declines in the values of private obligations, as investors no longer realistically differentiate among degrees of risk and liquidity and increases in the values of riskless government securities. consequently, the benefits of portfolio diversification will tend to be overestimated when the rare panic periods are not taken into account. as we make progress, hopefully, towards understanding asset - pricing mechanisms, we need also to upgrade our insights into the effect of changing asset values on gdp – the so - called wealth effect. although many aspects of this issue deserve attention, let me cite a few open questions of particular importance. efforts to differentiate between realized and unrealized gains, and the propensity to leverage both, may afford a deeper understanding of the consequences of asset price change. and differentiating between gains that arise from enhanced profitability and those that reflect changes in discount factors may also be useful. the former may be more likely to be sustained, given the tendencies of discount factors to revert back to historic norms. moreover, it is evident that borrowings against capital gains on homes influence consumer outlays beyond the effects of gains from financial assets. preliminary work at the federal reserve suggests that the extraction of equity from housing has played an important role in recent years. however, stock market values and capital gains on homes are correlated and, hence, their separate effects are difficult to identify. this is an area that clearly warrants further examination. finally, in the business sector, questions remain about the influence of equity prices on investment spending. in particular, do all equity price movements – whether related to fundamentals or not – have the same effect on investment spending? in conclusion, the issues that i have touched on this morning are of increasing importance