The Federal Reserve agreed with markets but tried to change the narrative

On Wednesday, September 18, 2024, I dissented from the Federal Open Market Committee's (FOMC) decision to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent. As the Committee's post-meeting statement notes, I preferred to lower the target range for the federal funds rate by 1/4 percentage point to 5 to 5-1/4 percent. Given the progress we have seen since the middle of 2023 on both lowering inflation and cooling the labor market, I agree that at this meeting it was appropriate to recalibrate the level of the federal funds rate and begin the process of moving toward a more neutral policy stance. In my view, however, a smaller first move in this process would have been a preferable action. The U.S. Economy Remains Strong The U.S. economy remains strong, with solid underlying growth in economic activity and a labor market near full employment. Although hiring appears to have softened, layoffs remain low. I see the normalization in labor market conditions as necessary to help bring wage growth down to a pace consistent with 2 percent inflation given trend productivity growth. My reading of labor market data has become more uncertain due to increased measurement challenges and the inherent difficulty in assessing the effects of recent immigration flows. I am also taking signal from continued solid growth in the spending data, especially consumer spending, reflecting a healthy labor market. Despite Progress, Inflation Remains a Concern Inflation remains above our 2 percent goal, as core personal consumption expenditures prices are still rising faster than 2.5 percent from 12 months earlier. Higher prices have an outsized impact on lower- and moderate-income households. Accomplishing our mission of returning to low and stable inflation at our 2 percent goal is necessary to foster a strong labor market and an economy that works for everyone in the longer term. post: FED'S BOWMAN ON HER DISSENT: I AGREED IT WAS APPROPRIATE AT THIS MEETING TO RECALIBRATE THE FED FUNDS RATE LEVEL, BUT I PREFERRED A SMALLER FIRST MOVE. post: FED'S BOWMAN: I SEE RISK THAT THE FOMC'S LARGER POLICY ACTION COULD BE INTERPRETED AS A PREMATURE DECLARATION OF VICTORY ON INFLATION.

post: FED'S HARKER: THE FED HAS DONE A GOOD JOB NAVIGATING ECONOMY.The Federal Reserve: It’s More Than Just Interest Rates Thank you all for being here, it truly is a treat to be in the Big Easy. I must thank my old friend, and your current president, Mike Fitts, who helped set this event in motion. President Fitts and I go back a long way, when he was first Professor Fitts and then Dean Fitts at the University of Pennsylvania’s Carey School of Law and I was a professor and then dean of the Wharton School. His first year as president of Tulane overlapped with my last year as president of the University of Delaware. There are two things I must do at the outset. First, I must say the following: The views I express today are my own and do not necessarily reflect those of the Federal Reserve System or the Federal Open Market Committee (FOMC). That’s the standard Fed disclaimer. But I always boil it down to the following — when you’re recalling today’s discussion you can always say, “Pat said,” you cannot say “the Fed said.” And second, while we’re talking disclosure, I must admit that I’m not here in New Orleans only to speak with you today. My son and I already booked our trip to watch our Philadelphia Eagles take on the Saints at the Superdome. When I mentioned to President Fitts that I was coming down, he invited me to campus, and I readily accepted. So, while I recognize I may be in rival territory, I am certainly comforted by all the green I see on campus. I also think Riptide and Swoop the Eagle would be good friends. So don’t worry, I’ll be rooting for the Green Wave tomorrow against the Ragin’ Cajuns. And if anyone has a recommendation for a good place to watch the game, come see me after!

post: FED'S HARKER: I SEE RISKS TO INFLATION AND EMPLOYMENT AS BALANCED. post: FED'S HARKER: THERE'S A RISK INFLATION COULD STALL, AND THERE IS A RISK THAT THE US LABOR MARKET COULD SOFTEN.