stanley fischer : recent monetary policy developments speech by mr stanley fischer, vice chair of the board of governors of the federal reserve system, at the “ energy transition : strategies for a new world, ” 35th annual ihs ceraweek, houston, texas, 23 february 2016. * * * i am grateful to william english, trevor reeve, and stacey tevlin for their assistance. my comments today reflect my own views and are not an official position of the board of governors or the federal open market committee. i would like to thank daniel yergin for his kind invitation to speak this evening at the ceraweek conference. the energy industry – more precisely, the price of oil – is on the minds of almost everyone these days, and this conference is addressing many important issues. i am a macroeconomist, and do not plan on focusing tonight on developments in the energy sector. but from time to time the price of oil becomes a macroeconomic issue, and this is one of those times. so i have been listening intently to the many experts who have already spoken here today, and look forward to the discussion that will follow this speech, in the belief that i will emerge with a better understanding of recent and future developments in the industry. to get things started, i thought i could provide some background on recent monetary policy decisions. as you all know, at our december meeting the federal open market committee ( fomc ) decided to raise the target range for the federal funds rate by 1 / 4 percentage point, to 1 / 4 to 1 / 2 percent. 1 at our meeting in january, we decided to maintain that range. the increase in december came after seven years during which the fomc had kept the federal funds rate between 0 and 25 basis points. this ultra - low rate was in keeping with our congressional mandate to pursue a monetary policy that fosters maximum employment and price stability, which we define as 2 percent inflation. our decision in december was based on the substantial improvement in the labor market and the committee ’ s confidence that inflation would return to our 2 percent goal over the medium term. employment growth last year averaged a solid 230, 000 per month, and the unemployment rate declined from 5. 6 percent to 5. 0 percent over the course of 2015 – and declined further to 4. 9 percent last month. this is close to the unemployment rate generally regarded as the full employment rate of unemployment. inflation ran well below our target last year, held down by the transit

but by considering a broader range of economic factors. i find this relatively public debate to be both instructive and healthy. it provides evidence of the depth of understanding and analysis by fomc members and supports the integrity of fomc voting patterns when observers note that ben and don have recorded identical votes during their tenures. one other thought on the fomc tendency for unanimous votes concerns the nature of chairman greenspan's leadership. the chairman encourages forthright and thorough discussion. he seeks consensus among fomc members, and the personal views he interjects into the discussion serve more as a beacon than a command. as a result, he achieves consensus through the quality of his leadership and the depth of his analysis. a final observation concerns the limitations of monetary policy. during the months between my nomination and swearing - in to the board, i read numerous articles and talked with many monetary policy authorities. a common theme during that time of preparation concerned monetary policy's limitations. in his come with me to the fomc article, larry meyer wrote eloquently on this very point. i will try to make the same point. the primary role of monetary policy is to achieve price stability. inflation, as milton friedman famously said, is always a monetary phenomenon. to control the supply of money is also, in the long run, to control the rate of inflation. by contrast, monetary policy does not as directly influence employment or output. therefore, much of the historic strength and resilience of the u. s. economy is only tangentially influenced by monetary policy. obviously, output and employment benefit from the environment of price stability that monetary policy works to achieve. monetary policy is also a blunt instrument. it does not, and cannot, target a particular segment of society or of the economy. fomc members become very conscious of this fact as every part of the economic cycle seems to benefit some and penalize others. overwhelmingly, however, monetary policy aimed at achieving price stability and maximum sustainable employment over time provides the best environment for job creation and improving living standards. it has been my privilege to associate with the men and women who constitute the federal open market committee. without exception, it is a dedicated, committed, and talented group that fully understands both the responsibilities and the limitations of making monetary policy for the united states. i hope this presentation has provided some insight into how we carry out our responsibilities.