##defense capital goods have declined since autumn. moreover, weakness emerged more recently among our trading partners in europe, asia, and latin america. the interaction of slowdowns in a number of countries simultaneously has magnified the softening each of the individual economies would have experienced on its own. because the extent of the slowdown was not anticipated by businesses, some backup in inventories occurred, especially in the united states. innovations, such as more advanced supply - chain management and flexible manufacturing technologies, have enabled firms to adjust production levels more rapidly to changes in sales. but these improvements apparently have not solved the thornier problem of correctly anticipating demand. although inventory - sales ratios in most industries rose only moderately, those measures should be judged against businesses'desired levels. in this regard, extrapolation of the downtrend in inventory - sales ratios over the past decade suggests that considerable imbalances emerged late last year. confirming this impression, purchasing managers in the manufacturing sector reported in january that inventories in the hands of their customers had risen to excessively high levels. as a result, a round of inventory rebalancing was undertaken, and the slowdown in the economy that began in the middle of 2000 intensified. the adjustment process started late last year when manufacturers began to cut production to stem the accumulation of unwanted inventories. but inventories did not actually begin falling until early this year as producers decreased output levels considerably further. much of the inventory reduction in the first quarter reflected a dramatic scaling back of motor vehicle assemblies. however, inventories of computers, semiconductors, and communications products continued to build into the first quarter, and these stocks are only belatedly being brought under control. as best we can judge, some progress seems to have been made on inventories of semiconductors and computers, but little gain is apparent with respect to communications equipment. inventories of high - tech products overall have probably been reduced a bit, but a period of substantial liquidation of stocks still seemingly lies ahead for these products. for all inventories, the rate of liquidation appears to have been especially pronounced this winter, and the available data suggest that it continued, though perhaps at a more moderate pace, this spring. a not inconsequential proportion of the current liquidation undoubtedly is of imported products, and thus will presumably affect foreign production, but most of the adjustment has fallen on domestic producers. at some point, inventory liquidation will come to an end, and its termination will spur production and incomes

philip n jefferson : on the assessment of current monetary policy speech by mr philip n jefferson, member of the board of governors of the federal reserve system, at the " how to get back on track - a policy conference ", hoover institution, stanford, california, 12 may 2023. * * * accompanying charts of the speech good afternoon, everyone. thank you to the organizers for inviting me to speak. it is a pleasure to be here. i welcome hearing diverse views on how to best conduct monetary policy, and this conference is certainly providing an invigorating debate on that topic. before i begin, i want to address quickly some news from this morning. i am deeply honored by the trust president biden and vice president harris have shown me with the nomination to be the next vice chair of the board. i am humbled by this extraordinary opportunity and thankful to my colleagues, friends, and family for their support. turning back to the conference, as i join this debate, let me remind you that the views i will express today are my own and are not necessarily those of my colleagues in the federal reserve system. introduction the title of the conference " how to get back on track : a policy conference " is potent. its intent and ambiguity are striking. first, the title presupposes that u. s. monetary policy is currently on the wrong track. second, the webpage for this conference advances a puzzling definition of the phrase " on track. " how so? according to the hoover webpage, " a key goal of the conference is to examine how to get back on track and, thereby, how to reduce the inflation rate without slowing down economic growth " ( emphasis added ). 1 as this audience knows, there are macroeconomic models that permit disinflation with no slowdown in economic growth, but the assumptions underlying these models are very strong. 2 it's not clear, at least to me, why such a strict metric would be used to assess real - world monetary policymaking. third, the definition of " on track " in the title contrasts with more commonplace definitions such as " achieving or doing what is necessary or expected, " as offered by a standard reference such as the merriam - webster dictionary. 3 my view is that this commonplace definition provides a more practical lens through which to assess real - world policymaking. against this semantic backdrop, i will begin my remarks with my perspective on the current inflation and economic situation. then, i will