Subscribe: Narayana Kocherlakota | President's Speeches | Federal Reserve Bank of Minneapolis
http://www.minneapolisfed.org/rss/pubs/rss_speeches.cfm
Added By: Feedage Forager Feedage Grade B rated
Language: English
Tags:
bank  education  federal reserve  federal  kashkari  monetary policy  neel kashkari  neel  policy  reserve system  reserve  system  today 
Rate this Feed
Rating: 4 starRating: 4 starRating: 4 starRating: 4 starRate this feed
Rate this feed 1 starRate this feed 2 starRate this feed 3 starRate this feed 4 starRate this feed 5 star

Comments (0)

Feed Details and Statistics Feed Statistics
Preview: Narayana Kocherlakota | President's Speeches | Federal Reserve Bank of Minneapolis

President's Speeches | Federal Reserve Bank of Minneapolis



Speeches given by the president of the Federal Reserve Bank of Minneapolis.



 



Neel Kashkari at Howard University Symposium on Too Big to Fail

Mon, 16 Apr 2018 00:00:00 -0400

The Howard University Department of Economics hosted “Too Big To Fail,” a symposium to reflect on the global financial crisis that unfolded 10 years ago. The symposium assessed potential solutions to insure the crisis does not repeat. Key among those solutions is a proposal from Federal Reserve Bank of Minneapolis President Neel Kashkari to improve the regulation of large banks and reduce the risks they create for the economy. A panel of experts responded by discussing the impacts the crisis had on workers and consumers, the economy and those setting monetary policy. See more information about the event.










Neel Kashkari remarks from events in NYC, NY (audio only)

Fri, 23 Mar 2018 00:00:00 -0400

President Kashkari participated in the GAME VIII Conference, in dialogue with Kathleen Hays of Bloomberg TV, and additional Q and A with the audience. (61 mins).

Later, Kashkari held an audience Q&A at the University Club of New York (57 mins)










Neel Kashkari speaking at Cargill

Tue, 09 Jan 2018 00:00:00 -0500




Neel Kashkari at Lambda Alpha International

Tue, 19 Dec 2017 12:10:00 -0500







Tribal Community Perspectives on Higher Education

Wed, 27 Sep 2017 08:15:00 -0400

Thank you, Dick. About a year ago, I had the pleasure of welcoming a national audience to the Center for Indian Country Development’s Conference on Early Childhood Development in Indian Country. Today I’m pleased to welcome a new national audience to another CICD conference on education, this time on higher education. The CICD and I both see education as potentially a great equalizer in our society. A child born into poverty who receives a good education can climb out of poverty and reach his or her full potential. But the real power of education, even beyond transforming an individual’s life, is that it also breaks the cycle of intergenerational poverty that continues to devastate so many families and communities. In that sense, this conference’s focus on a community perspective is wise and important. I’ll come back to the topic of education, but let me first give you some background on the Federal Reserve System and the work of the Federal Reserve Bank of Minneapolis. As part of that, I should note that the views I express here are my own and not necessarily those of the Federal Reserve System. The Federal Reserve System, or the Fed, is a public institution serving the American people. We are the nation’s central bank. Our most fundamental responsibility is monetary policy in pursuit of two objectives—maximum employment and stable prices, the so-called dual mandate that Congress has established for the Fed. The Fed also has been given significant authority as supervisor of financial institutions and as a provider of payments services. All of these activities are common to many central banks around the world. What makes the Fed different, and what brings us together in Minneapolis today, is the Fed’s decentralized structure. One hundred four years ago, Congress created the Federal Reserve, our nation’s central bank. But they did something unique: They distributed the central bank across 12 regional, independent Federal Reserve Banks, rather than having it all housed at the Board of Governors in Washington, D.C. Congress did this to ensure that different regions of the country were directly represented in economic policymaking and so that the many local varying conditions across the United States were appropriately considered. That’s why we have a Federal Reserve Bank in Minneapolis—to understand and represent the economic conditions in our region, which we call the Ninth Federal Reserve District. The Minneapolis Fed’s charge has always included a responsibility for understanding the economies of the 45 federally recognized Indian tribes in the Ninth District. To leverage our decades of experience with tribal communities, we established the CICD in 2015 as a national resource and thought leader within the Federal Reserve System on Indian Country issues across the entire country. That’s why today’s conference deals with tribal communities generally, not just those in the Ninth District. You may wonder, however, what does education have to do with the Fed? It comes back to our dual mandate of stable prices and maximum employment. Education is clearly a key determinant of employment outcomes and the economy’s maximum rate of growth. People who receive more and better education tend to have more job options and lower unemployment, and they are more productive workers. It is vital that we understand education if we want to understand the drivers of maximum employment. And while the Federal Reserve may not have policy tools that can directly affect education, we do have world-class independent research capabilities that might be able to help. We have researchers in the Federal Reserve studying productivity growth that we, as our nation’s central bank, cannot directly influence. Similarly, [...]









Neel Kashkari with the Edina Rotary Club

Thu, 17 Aug 2017 00:00:00 -0400






















Neel Kashkari with Paul Weech at a CICD Roundtable

Tue, 23 May 2017 00:00:00 -0400













Q&A with Neel Kashkari at Claremont McKenna College

Mon, 24 Apr 2017 14:15:00 -0400




Q&A with Neel Kashkari at Fink Investing Conference

Mon, 24 Apr 2017 10:30:00 -0400

More information about the event.

 

 

 

 

 

 













Transforming Education

Thu, 23 Mar 2017 13:00:00 -0400

Good morning. Thank you, Michael, for that kind introduction. It is a pleasure to be here with all of you at this important conference. I am going to give some prepared remarks, and then I look forward to taking your questions. I am going to challenge you in my remarks. I hope you challenge me right back with your questions in an active discussion. Before I begin, let me remind you that my comments are my own, and do not necessarily represent the views of the Federal Reserve System. Introduction The goal of this conference is to “explore the interplay between the development of kids and their communities, with an understanding that ‘development’ factors into key economic and social aspects of kids’ lives.” We know that there are many important factors that contribute to the health of communities and the opportunities that children have, including family, education, health care, safety and nutrition, among others. All are important, but in my talk I am going to focus on education—because I believe education, more than anything else, can and must be the great equalizer in our society. A child born into poverty who receives a good education can climb out of poverty and reach his or her full potential. You know as well as I do that children who stay in school and receive a good education are far more likely to stay away from drugs, gangs and crime, to get a good job and to have a healthy, productive life. But the real power of education is that it transforms more than one life. An entire lineage—future generations, children and grandchildren—can be put on a safer, healthier, more prosperous path. Education, more so than anything else, has the ability to break the cycle of poverty that continues to devastate so many families and communities. Children of parents who stay in school and get a good education are far more likely to follow a similar path.1 You know the old adage: Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime? Well, I think we should update it: Teach a man or woman to fish, and they will teach their children to fish. That is the real power of education. You may wonder: Why is a senior Federal Reserve official talking about education? What does education have to do with the Fed? Congress has given the Fed a dual mandate, which we talk about all the time: stable prices and maximum employment. As I mentioned earlier, a key determinant of employment outcomes is education. People who receive more and better education tend to have more job options and lower unemployment. It is vital to understand education if we want to understand the drivers of maximum employment. And while the Federal Reserve may not have policy tools that can directly affect education, we do have world class independent research capabilities that might be able to help. We have researchers in the Federal Reserve studying productivity growth that we, as our nation’s central bank, cannot directly influence. Similarly, if the Fed can objectively analyze education models that can help more Americans get and keep good jobs, I believe it is important we do that research and share our findings with other policymakers. This research may help us achieve maximum employment as a nation. The context for chan[...]






Q&A with Neel Kashkari in Golden Valley

Tue, 21 Feb 2017 07:30:00 -0500




Introducing the Opportunity and Inclusive Growth Institute

Wed, 18 Jan 2017 10:00:00 -0500

Thank you, Steven, for that kind introduction. I appreciate you and the Minneapolis Urban League for hosting this event today, and I look forward to our discussion. Before I begin, I would like to remind everyone that my remarks today are my own and don’t necessarily reflect those of the Federal Open Market Committee. One hundred four years ago, Congress created the Federal Reserve, our nation’s central bank, but they did something unique: They distributed the central bank across 12 regional, independent Federal Reserve Banks, rather than having it all housed at the Board of Governors in Washington, D.C. Congress did this to ensure that different regions of the country were directly represented in economic policymaking and so that the many local varying conditions across the United States were appropriately considered. That’s literally why we have a Federal Reserve Bank in Minneapolis—to understand and represent the economic conditions in our region, which we call the Ninth Federal Reserve District. I have been president of the Minneapolis Fed for just over one year. Although I grew up in the Midwest, I am new to the Ninth District, so getting out across the district and getting to know our many communities, their strengths and their challenges is very important to me. In that regard, we’ve had a productive first year: I’ve traveled across the Ninth District, visiting many parts of Minnesota, but also North and South Dakota, Montana, Wisconsin and the Upper Peninsula of Michigan. People have repeatedly asked me what has most surprised me about our region and, specifically, about Minnesota. Our region has many strengths: a diverse economy, with agriculture, manufacturing, natural resources, health care and technology sectors all represented. The business community here has an unusually strong, genuine interest in civic engagement and giving back to the community, complemented by strong nonprofit and philanthropic sectors. We also have an educated, high-performing workforce and, on average, low unemployment. That workforce is supported by an education system that consistently ranks near the top in national surveys. Minnesota ranks number three in the country according to test scores, with 45 percent of our students above the proficiency level. Our high school graduation rate is 92.4 percent, which is the second best in the country. Our labor force participation rate is seventh highest, and our poverty rate ties for the third lowest in the United States. Those are some of the positives—there is indeed much to be proud of. Yet I was surprised to learn with all that success, our region and Minnesota in particular have some of the worst racial and economic disparities in the country. Difference in median income between whites and African Americans is $30,000, giving us a rank of 41st across states. Moreover, we rank 40th in unemployment gap, 40th in test score gaps and 42nd in differences in high school graduation rates. I didn’t expect to find this, and I don’t understand why it is that way. So I began to ask questions of our research economists at the Minneapolis Fed. Why do we have these gaps? The truth is we don’t know for sure. I[...]



Neel Kashkari Presents the Minneapolis Plan to End Too Big to Fail

Wed, 16 Nov 2016 07:00:00 -0500

This speech is also available on Medium Thank you, Chairman Lundgren, for that warm introduction.1,2 I would also like to thank the Economic Club of New York for inviting me today, and David Wessel, of the Brookings Institution, for joining us to moderate our discussion. Before I begin, I would like to remind everyone that the views I express today are my own, and not necessarily those of the Federal Open Market Committee or the Board of Governors, which sets supervision and regulatory policy for the Federal Reserve System. In February, I announced that the Federal Reserve Bank of Minneapolis was launching an initiative to develop a plan to end the problem of too big to fail (TBTF) banks, and I committed us to releasing a plan by the end of the year. Today we are fulfilling that commitment. I believe our initiative demonstrates the strength of the distributed structure of the Federal Reserve System that Congress created more than 100 years ago, which they designed to encourage a diversity of perspectives on important economic issues. The purpose of my speech is to introduce the Minneapolis Plan to end TBTF. I will give some background on the development of the plan, describe what it accomplishes, walk through the key steps of the plan, and then I look forward to discussing it with David and then with the audience. This morning, we published two documents: First, a Summary for Policymakers and, second, the Full Proposal of the Minneapolis Plan. Those of you here in the audience have a hard copy of the summary in front of you. Both documents are available on the Minneapolis Fed website. I come at the TBTF problem from the perspective of a policymaker who was on the front line responding to the 2008 financial crisis. When Congress moved quickly to pass the Dodd-Frank Act (the Act) in 2010, I strongly supported the need for financial reform, but I wanted to see the Act implemented before I drew firm conclusions about whether it solved TBTF. Over the past six years, my colleagues across the Federal Reserve System have worked diligently under the reform framework Congress established and are fully utilizing the available tools under the Act to address TBTF. While significant progress has been made to strengthen the U.S. financial system, I believe the biggest banks are still TBTF and continue to pose a significant, ongoing risk to our economy. Our initiative brought together a wide range of experts on financial crises and banking regulation through a series of symposiums in Minneapolis and Washington, D.C. By design, we wanted to hear all views. Some experts argued in favor of the current regulatory framework, while others argued for more transformational approaches. We learned something from everyone who participated, and we are grateful for their willingness to candidly share their ideas. Expert participants in our symposiums included former policymakers such as former Federal Reserve Chairman Ben Bernanke, Vice Chairman Roger Ferguson, and Governor Randy Kroszner. They included leading academics, such as Anat Admati of Stanford and Simon Johnson of MIT, among many others. They included policy experts from think tanks, such as Adam Posen of the Peterson Institute [...]



Q&A with Neel Kashkari

Wed, 09 Nov 2016 12:30:00 -0500







Q&A with Neel Kashkari at Bethel University

Tue, 11 Oct 2016 10:00:00 -0400




Opening Remarks at the Early Childhood Development in Indian Country Conference

Wed, 05 Oct 2016 08:30:00 -0400

Thank you, Patrice. It’s a pleasure, in more ways than one, to welcome all of you to this conference. It’s a pleasure, in part, because getting to know a broad range of people like you, and to learn about the issues you care about, is one of the most important and enjoyable responsibilities of a Reserve Bank president. It’s also pleasing because this conference marks a significant milestone—it’s the first major conference at the Bank for our new Center for Indian Country Development. We established the center last year with a mission to help American Indian communities throughout the United States attain their economic development goals. Education, one of the CICD’s primary areas of focus, is a fundamental building block for reservation workforce and economic development. Most of all, however, I’m excited to welcome you because your topic, early childhood development in Indian Country, is directly related to one of my own core public policy concerns—ensuring that all American children get a first class education. Before I expand on that, let me give you some background on the Federal Reserve System and the work of the Minneapolis Federal Reserve Bank. As part of that, I should note that the views I express here are my own and not necessarily those of the Federal Reserve System. The Federal Reserve System, or the Fed, is a public institution serving the American people. We are the nation’s central bank. Our most fundamental responsibility is monetary policy in pursuit of two congressionally determined objectives—maximum employment and stable prices. The Fed also has been given significant authority as supervisor of financial institutions and as a provider of payments services. All of these activities are common to many central banks around the world. What makes the Fed different, and what brings us together here today, is the Fed’s decentralized structure. Over 100 years ago, Congress created a central bank compatible with the size and diversity of our country. Congress decided that this critical public institution, the U.S. central bank, would not be based just in Washington or New York. Instead, 12 independent Reserve Banks are dispersed across the country, in central cities like Minneapolis, where my peers and I are charged with developing a broad understanding of the communities, economies, and policy concerns of our regional district. It’s that broader mandate that brings us together today—the opportunity to contribute to an array of public policy issues, not just monetary policy. While this event is the Center for Indian Country Development’s first conference at the Bank, I should note that this work builds on a long tradition here at the Minneapolis Fed. As far back as the 1970s, we were engaged with tribal communities on economic development issues. That work has since then accelerated in scope and scale. A key player in that effort has been our Helena, Montana, Branch Executive Sue Woodrow, who is with us here today. Sue’s work with tribes, especially on b[...]



Town Hall Event Featuring President Kashkari

Thu, 29 Sep 2016 13:30:00 -0400










Conversation with Federal Reserve Bank Presidents James Bullard and Neel Kashkari

Fri, 15 Jul 2016 12:15:00 -0400

Listen (52 minutes) to the conversation between President Kashkari and President Bullard on July 15, 2016, moderated by David Marsh, Managing Director of Official Monetary and Financial Institutions Forum.

 

 




An Update on Ending Too Big to Fail

Mon, 20 Jun 2016 00:00:00 -0400

Note* Good afternoon. Thank you, Adam, for that kind introduction and for you and your colleagues at the Peterson Institute co-hosting this important event with us. Scholars at the Peterson Institute have been leaders in addressing financial stability and systemic risk issues, and we are pleased to collaborate with you on today’s event. Before I begin, I would just like to remind everyone that the views I express today are my own and not necessarily those of the Federal Open Market Committee or the Board of Governors, which sets supervision and regulatory policy for the Federal Reserve System. I come at the too-big-to-fail (TBTF) problem from the perspective of a policymaker who was on the front line responding to the 2008 financial crisis. Over the past six years, legislators and regulators have worked hard to address TBTF. My colleagues in the Federal Reserve System, working closely with other financial regulators, have implemented important tools and regulations that are making the financial system stronger under the reform framework Congress established. I agree that many current reform efforts are headed in the right direction, particularly those that make banks1 stronger with additional capital and deeper liquidity. But I do not think these measures go far enough. As a result, we are working on a plan to end TBTF and are hosting a series of public symposiums, including today’s, that bring together some of the foremost experts on financial stability, bank regulation and systemic risk. And we have asked these experts to explore the current and potential alternative regulatory frameworks to address the risks posed by large banks. Today I will update you on that effort. Specifically, I will cover three main items in our initiative to end TBTF: First, information from our May symposium makes me even more committed to recommending transformational solutions to address the systemic risks posed by large banks. What I heard suggests deep and broad agreement that the largest banks in the country are still TBTF and that we need to act now to fix this problem. Second, I will highlight some of the key take-aways from our first two symposiums that reinforce my concerns about current efforts to address TBTF. I left our May symposium profoundly skeptical that current efforts will ultimately work. Third, I will end with important questions that have been raised in our initiative so far that require additional understanding. Then I look forward to having a discussion with Adam, Bertrand and the audience.  Common ground on what needs to occur I started the ending TBTF initiative knowing that while we would have many supporters across the spectrum, many others might disagree with our effort. And, not surprisingly, we have received significant criticism from big banks and their lobbyists who would like to discredit this important initiative. But one of the main take-[...]



The Role and Limitations of Monetary Policy

Mon, 09 May 2016 12:15:00 -0400

Note* Good morning. Thank you, Kathy, for that kind introduction. I commend you for your excellent judgment in selecting Mark Kennedy to lead the University of North Dakota as its new president. Congratulations, Mark, on this wonderful and well-deserved appointment, and thank you, and the Economic Club of Minnesota, for hosting this event and inviting me to address your members. Before I begin, I would just like to remind everyone that the views I express today are my own and not necessarily those of the Federal Open Market Committee. In this speech, I am going to talk about monetary policy—not just about what policy I think is appropriate today, but also about how I am approaching the task of communicating about monetary policy in the context of important problems we face as a nation. I am going to spend some time talking about what monetary policy can do for society, and what it can’t do, and why it’s important that we understand those differences. I find forming my monetary policy views in the current economic environment easier than determining how to communicate them in a way that advances the Fed’s policy goals. One of the things I really like about my job is that it is multifaceted. There is a large management responsibility leading an organization of a thousand people. There is a deep policy component, as we craft policy recommendations for interest rates as well as for other important economic topics such as financial stability. And there is the public facing aspect, both representing the Bank across the Ninth Federal Reserve District and advocating for our public policy views. As you can probably tell from our initiative to end too big to fail (TBTF), I am not shy about speaking my mind and advocating for policies I believe are in the best interest of the country. But I give careful consideration to whether drawing attention to an issue is the best way to positively influence that issue. In the case of TBTF, I believe we need to have a serious national conversation about whether we have done enough to address large bank failures. This is why we are having public symposiums to raise awareness and educate the American people while we educate ourselves. But not every issue will be advanced by drawing more attention to it, and this is why I have been more hesitant to speak out about monetary policy, even though I do have views about the right course of action. I think market participants are too focused on the Fed, and I am reluctant to draw even more attention to short-term monetary policy decisions, when attention should be focused on solutions to longer-term issues. When I think about the market’s preoccupation with every short-term move the Fed might make, I am reminded of the Summer of the Shark in 2001. Sharks had gone crazy and were biting people seemingly every day. Television crews were camped out at beaches re[...]



Update on Minneapolis Fed Ending Too Big to Fail Initiative

Mon, 18 Apr 2016 00:00:00 -0400

Note* Good afternoon. Thank you for that warm introduction. I appreciate the Minnesota Chamber of Commerce hosting this event today and inviting me to address its members. Before I begin, I would just like to remind everyone that the views I express today are my own and not necessarily those of the Federal Open Market Committee or the Board of Governors, which sets supervision and regulatory policy for the Federal Reserve System. In today’s talk, I will cover two main items. First, I will explain why we launched a major initiative to end too big to fail (TBTF). I continue to think that the largest banks1 in the country are too big to fail, and I am skeptical that current efforts to fix that problem will ultimately work. I will provide a few key examples from the recent financial crisis, when I ran the Troubled Assets Relief Program (TARP), which explain why I am skeptical. Second, I will summarize where our initiative stands today. We just had our first symposium,2 which focused on two transformational reforms to end TBTF. I will summarize key points I took away from that event. I will then conclude with issues that I continue to wrestle with as we seek the right reform framework. Then I will be happy to take your questions. Current Efforts to Address TBTF I come at the too-big-to-fail problem from the perspective of a policymaker who was on the front line responding to the 2008 financial crisis. In the past six years, legislators and regulators have worked hard to address the TBTF problem. My colleagues in the Federal Reserve System, working closely with other financial regulators, have implemented important tools and regulations that are making the financial system stronger under the reform framework Congress established. I agree that many current reform efforts are headed in the right direction, particularly those that make banks stronger with additional capital, deeper liquidity and stress testing. But I am not sure those measures go far enough. More importantly, we know that banks will still get into trouble. So we need a way to deal with failing large banks. The current reforms attempt to address this problem with a new legal framework to resolve failing banks combined with a plan to bring new investors into banks who agree to absorb losses when the bank gets into trouble. The idea is that by having these new investors take the hit, taxpayers will not be on the hook. This sounds good, but it has not worked in practice in prior crises, and I doubt it will work in the future. I fear policymakers will have to turn to taxpayers rather than impose losses on creditors. My experiences from the 2008 crisis highlight this problem. One of the toughest challenges we faced was dealing with risk spreading between large banks: Multiple large banks were under stress at the same time, and actions we might have taken to recapitalize one bank (by haircutting creditors or c[...]



A Conversation with Neel Kashkari at Greater MSP

Tue, 23 Feb 2016 08:00:00 -0500




Lessons from the Crisis: Ending Too Big to Fail

Tue, 16 Feb 2016 00:00:00 -0500

Note* Thank you, David, for that kind introduction. It is great to be back at the Brookings Institution. Before I begin, I just want to remind everyone that the views I express today are my own and not necessarily those of the Federal Open Market Committee or the Board of Governors, which sets supervision and regulatory policy for the Federal Reserve System. Today I will offer my assessment of the current status and outlook for ending the problem of too big to fail (TBTF) banks.1 I come at this problem from the perspective of a policymaker who was on the front line responding to the 2008 financial crisis. When Congress moved quickly to pass the Dodd-Frank Act (the Act) in 2010, I strongly supported the need for financial reform, but I wanted to see the Act implemented before I drew firm conclusions about whether it solved TBTF2. In the last six years my colleagues across the Federal Reserve System have worked diligently under the reform framework Congress established and are fully utilizing the available tools under the Act to address TBTF. While significant progress has been made to strengthen our financial system, I believe the Act did not go far enough. I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy. Enough time has passed that we better understand the causes of the crisis, and yet it is still fresh in our memories. Now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions to solve this problem once and for all. The Federal Reserve Bank of Minneapolis is launching a major initiative to develop an actionable plan to end TBTF, and we will deliver our plan to the public by the end of the year.  Ultimately Congress must decide whether such a transformational restructuring of our financial system is justified in order to mitigate the ongoing risks posed by large banks.   Although TBTF banks were not the sole cause of the recent financial crisis and Great Recession, there is no question that their presence at the center of our financial system contributed significantly to the magnitude of the crisis and to the extensive damage it inflicted across the economy. Given the scale of job losses, home foreclosures, lost savings and costs to taxpayers, there is widespread agreement among elected leaders, regulators and Main Street that we must solve the problem of TBTF. We know markets make mistakes; that is unavoidable in an innovative economy. But these mistakes cannot be allowed to endanger the rest of the country. When roughly 1,000 savings and loans failed in the late 1980s, there was no risk of an economic collapse. When the technology bubble burst in 2000, it was very painful for Silicon Valley and for technology investors, but it did not repres[...]



Monetary Policy Renormalization

Fri, 04 Dec 2015 14:45:00 -0500

Note* There has been a great deal of public conversation about the onset of what is called “monetary policy normalization.” The website of the Board of Governors of the Federal Reserve System defines “monetary policy normalization” as the process of raising the fed funds rate and other interest rates to more normal levels and reducing the size of the Federal Reserve’s securities holdings.1 This definition leaves unstated what kind of strategic framework will guide the Federal Open Market Committee’s (FOMC’s) decisions about the target range for the fed funds rate and the size of the balance sheet. However, at least to my ears, the term “normalization” connotes that the FOMC is aiming to return to a strategic framework that closely resembles the one used prior to the financial crisis. In this talk, I argue that the FOMC would be better served by instead turning to a different strategic framework. My argument unfolds with three points. First, I provide a characterization of the FOMC’s pre-2008 policy framework. Many observers have noted that this framework was largely grounded in the Taylor Rule.2 I argue that the Taylor Rule requires the central bank to tolerate persistent inflation and employment shortfalls in order to limit deviations of the fed funds rate from historically normal levels. Second, I use the public record to document that, as of late 2009, the FOMC felt that it would be appropriate to use its monetary policy tools to foster a relatively slow recovery in both prices and employment. (The recovery that actually unfolded was slower than the FOMC intended in terms of employment, but close to the FOMC’s intentions in terms of inflation.) I argue that the FOMC’s guarded response can be traced back to its pre-2008 policy framework—that is, to the Taylor Rule. Indeed, because of this baseline “normal” policy framework, the FOMC and many outside observers actually saw the Committee as pursuing a highly accommodative policy. Third, motivated by these observations, I suggest that the FOMC should change its “normal” policy framework. I recommend that the Committee adopt a more goal-oriented approach, in which the level of accommodation is highly responsive to the FOMC’s medium-term forecasts of inflation and output gaps. This change would engender better economic outcomes, especially in response to severe adverse shocks. The views that I express today are my own and are not necessarily those of others in the Federal Reserve System. I note too that I intend to recuse myself from the December FOMC meeting, given that it takes place so close in time to my last date as president (December 31, 2015).   Point 1: An Aversion to Large Policy Re[...]



Still Room for Improvement

Thu, 08 Oct 2015 12:00:00 -0400

Thank you for that generous introduction, and thank you for the opportunity to speak to you today. My speech today focuses on the behavior of the labor market over the past nine years. I will document that, after several painful years of labor market stagnation, the United States experienced truly historic improvement in labor market performance in 2014. Unfortunately, these labor market gains have slowed markedly in 2015. This may suggest to some that there is little room for further improvement in labor market outcomes. I will argue that current and projected low inflation presents strong evidence to the contrary. There is room for more improvement—but we will only achieve those gains if we make the right monetary policy choices. I will describe what I believe those right choices to be. I look forward to taking your questions at the end of my prepared remarks. For me, those questions are a highlight of my speaking engagements. As I will discuss, two-way communication between policymakers and citizens is a core function of the Federal Reserve System. Your questions are a key part of that two-way communication. The views that I express today are my own and are not necessarily those of others in the Federal Reserve System. Federal Reserve System basics Let me begin with some basics about the Federal Reserve System. I like to tell people that the Fed is a uniquely American institution. What do I mean by that? Well, relative to its counterparts around the world, the U.S. central bank is highly decentralized. The Federal Reserve Bank of Minneapolis is one of 12 regional Reserve Banks that, along with the Board of Governors in Washington, D.C., make up the Federal Reserve System. Our Bank serves as the headquarters for Federal Reserve operations in the ninth of the 12 Federal Reserve districts, which includes Montana, the Dakotas, Minnesota, northwestern Wisconsin and the Upper Peninsula of Michigan. Eight times per year, the Federal Open Market Committee—the FOMC—meets to set the path of monetary stimulus over the next six to seven weeks. All 12 presidents of the various regional Federal Reserve Banks—including me—and the governors of the Federal Reserve Board contribute to these deliberations. However, the voting members of the Committee itself consist only of the governors, the president of the Federal Reserve Bank of New York and a rotating group of four other presidents. In this way, the structure of the FOMC mirrors the structure of our government, because representatives from different regions of the country—the various presidents—have input into FOMC deliberations. This decentralized system has many desirable attributes. I believe one of the most important is that it facilitates two-way communication between the [...]



Discussion of: “Should the FOMC Have a Ternary Mandate?”

Fri, 02 Oct 2015 00:00:00 -0400

Note* I want to thank the organizers, and President Eric Rosengren in particular, for inviting me to be part of this conference and for inviting me to discuss this very interesting paper. The paper’s title poses a normative question: “Should the FOMC have a ternary mandate?” I thought that this was a very interesting question, and it’s what I plan to address in the bulk of my remarks. The paper itself addresses a different question, “Does the FOMC act as if it has a ternary mandate?” I’ll return to this also interesting question at the very end of my discussion. My basic premise is that, whatever the benefits of a mandate, it is undesirable for that mandate to reduce the level of clarity among policymakers and the public about monetary policy choices and outcomes. Along those lines, I will argue that a mandate is likely to add to public uncertainty about the course of policy and the economy unless: It can be formulated in terms of a long-run quantitative economic objective. There is clarity about symmetry: that is, how the FOMC views positive, as opposed to negative, deviations from the objective. It is clear over what time frame the FOMC should seek to eliminate undesirable transitory deviations from the long-run objective. I’ll illustrate the usefulness of these three criteria by applying them to the existing two mandates. I’ll then use them to argue that, whatever the benefits of a ternary mandate, such a mandate would have substantial costs in terms of adding to policy and economic uncertainty. I’ll wrap by actually saying a few words about the paper! All of the views that I express today are my own, and are not necessarily those of others in the Federal Reserve System. As well, I want to be clear that I view the decision about whether to adopt a financial stability mandate for monetary policy as being entirely the province of Congress, not the Federal Reserve. I’m merely offering some thoughts on the costs of such a mandate for the consideration of interested members of the public. Price stability mandate Congress has mandated that the FOMC should make policy so as to promote price stability. Over the past few years, the FOMC has taken significant steps to make this verbal mandate a more useful foundation for the making of monetary policy. In January 2012, the FOMC adopted a description of its long-run goals and strategies that I’ll call the “framework statement.” It translates the words “price stability” into a quantitative goal of a 2 percent annual inflation rate. Here, the term “inflation rate” refers specifically to the personal consumption expenditures (or PCE) inflation rate. Last year, the FOMC [...]



Public Debt and the Long-Run Neutral Real Interest Rate

Tue, 08 Sep 2015 16:15:00 -0400

Note1 Thanks for the introduction and the invitation to be here today. It is a pleasure to be back at Northwestern. I was an assistant professor in the Kellogg School back in the late ’80’s, and it was a tremendous learning experience for me that I remember quite fondly.  My remarks today are divided into three parts. In the first part of the talk, I examine the behavior of the yields to Treasury Inflation-Protected Securities (that is, TIPS) and the yields to nominal Treasuries over the past decade. Using this evidence, I argue that, over that period of time, there has been a notable decline in the long-run neutral real interest rate. By the long-run neutral real interest rate, I mean the real interest rate that I expect to prevail when the economy is at maximum employment and inflation is at the central bank’s target. In the second part of my talk, I discuss two costs associated with the decline in the long-run neutral real interest rate. The first cost is that there is an increased risk that monetary policymakers will be constrained by the lower bound on the nominal interest rate. The second cost is that there is an increased risk of financial instability. Finally, I discuss how fiscal policy can be used to increase the long-run neutral real interest rate. I consider a permanent increase in the market value of the public debt that is serviced by an increase in future taxes or a reduction in future transfers. This policy change increases the supply of assets available to investors. I argue that, in a wide class of plausible economic models, such an increase in supply would push downward on debt prices, and so upward on the long-run neutral real interest rate. When I put these three points together, I reach my main conclusion. The decline in the long-run neutral real interest rate increases the likelihood of financial instability and the likelihood that the economy will run into the lower bound on nominal interest rates. Fiscal policymakers can mitigate these risks by choosing to maintain higher levels of public debt than markets currently anticipate. I want to be clear at the outset that I am not saying that it is appropriate for fiscal policymakers to increase the long-run level of public debt. I am simply pointing to two key benefits associated with such an increase. I will also point to other costs (and benefits) associated with increasing the level of public debt. Sorting through them is outside the scope of my remarks today, and really outside my purview as a monetary policymaker. My remarks today reflect my own views, and not necessarily those of others in the Federal Reserve System. Context: What Is the Neutral Real Interest Rate? I begin[...]