the economic outlook : time to let the data do the talking remarks by christopher j. waller member board of governors of the federal reserve system at the 17th annual vienna macroeconomics workshop vienna, austria september 9, 2022 thank you, klaus, and thank you for the invitation to speak at this workshop, which i have been attending since its very beginning in 2004. something that i love about this conference that has kept me coming back almost every year is its tradition of open inquiry and even some fun, on the one hand, combined with rigorous, critical analysis, on the other. i am a supporter, and i guess a practitioner, of rigorous criticism, because, as you may have heard, the conference award given each year for “ outstanding critic ” was named for me. based on the standard i set, the person who wins the award is also known as the “ most annoying participant. ” i suppose it was only karma that a guy like me who likes to dish out the criticism would end up in a job that receives plenty of it. kidding aside, i do consider being the namesake for this award a great honor, and just to make sure i don ’ t get too much of a swelled head, by tradition the conference organizers purposefully misspell my name. my subject today is the outlook for the u. s. economy and the federal reserve ’ s ongoing campaign to bring down inflation and achieve our 2 percent objective. 1 there are three takeaways from my speech today. first, inflation is far too high, and it is too soon to say whether inflation is moving meaningfully and persistently downward. the federal open market committee ( fomc ) is committed to undertake actions to bring inflation back down to our 2 percent target. this is a fight we cannot, and will not, walk away from. the second takeaway is that the fears of a recession starting in the first half of this year have faded away and the robust u. s. labor market is giving us the flexibility to be aggressive in our fight against inflation. for that reason, i support continued increases in the fomc ’ s policy rate and, based on what i know today, i support a these views are my own and do not represent any position of the board of governors or other federal reserve policymakers. - 2significant increase at our next meeting on september 20 and 21 to get the policy rate to a setting that is clearly restricting demand. the final takeaway is that

total industrial production increased 0. 6 percent in july, standing 3. 9 percent above its level a year ago. forward - looking indicators of manufacturing activity, such as new orders indexes in various manufacturing surveys, are softer than earlier in the year, but most ( and in particular the positive august reading from the ism ) are not suggestive of a material pullback in manufacturing activity. meanwhile, the non - manufacturing ism report suggests continuing growth, with its new orders index rising to a solid level last month. but there are signs of moderation in economic activity, which is what the fomc is trying to achieve by tightening monetary policy. not surprisingly, higher interest rates this year are slowing activity in the housing market. there have been declines in construction of single - family homes for a number of months, with permits and home starts both decreasing in july. sales of existing and new single - family homes have also slowed. existing home sales fell by 5. 9 percent to a seasonally adjusted annual rate of 4. 8 million homes in july. while the imbalance between housing supply and demand - 4remains significant, it has meaningfully improved. the inventory of unsold new and existing homes has more than doubled since january. while the three months supply of existing home is still below levels before the pandemic, the eleven months of new home inventory is the highest since the spring of 2009. this latter statistic has raised concerns by some about a significant downturn looming in the housing market, but an important caveat is that much of the current elevated inventory reflects the recent low rate of housing completion due to continued supply constraints. many of these new homes for sale are still under construction, and as supply constraints ease, builders will be able deliver more completed homes to a market where the supply of existing homes remains tight. all that said, the housing market is a significant channel for monetary policy, and i will be watching this sector carefully. the fomc ’ s goal is that the tightening in monetary policy slows aggregate demand so that it is in better alignment with supply across all sectors of the economy. my expectation is that strong household savings, the tight labor market, and additional availability of manufactured goods as supply chains constraints continue to resolve will allow households to make long - awaited purchases, which will provide a partial offset to tighter policy. that will support a slowing, rather than a contraction, in demand. turning to the very strong labor market, private payroll employment has been