Inquiring minds are investigating Jerome Powell's speech on his Outlook for the U.S. Economy presented today at the Economic Club of Chicago, Chicago, Illinois. Here are a few key quotes.
- After what at times has been a slow recovery from the financial crisis and the Great Recession, growth has picked up. The labor market has been strong, and my colleagues and I on the Federal Open Market Committee (FOMC) expect it to remain strong.
- Trends in participation have been more pronounced in the United States than in other advanced economies.
- There is no consensus about the reasons for the long-term decline in prime-age participation rates, and a variety of factors could have played a role. Research suggests that structurally-oriented measures--for example, improving education or fighting the opioid crisis--also will help raise labor force participation in this age group.
- The balance sheet reduction process is going smoothly and is expected to contribute over time to a gradual tightening of financial conditions. Over the next few years, the size of our balance sheet is expected to shrink significantly.
- The FOMC's patient approach has paid dividends and contributed to the strong economy we have today.
- My FOMC colleagues and I believe that, as long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals
- It remains the case that raising rates too slowly would make it necessary for monetary policy to tighten abruptly down the road, which could jeopardize the economic expansion. But raising rates too quickly would increase the risk that inflation would remain persistently below our 2 percent objective. Our path of gradual rate increases is intended to balance these two risks.
Not Too Fast Not To Slow
On the whole, it was an interesting speech, at least compared to the drivel from Janet Yellen on the Phillips Curve.
But here is my bottom line translation: "We really do not know what we are doing, but we are going to keep doing it."
Rear View Mirror
The market did not seem to appreciate the beauty of that not too hot not too cold message, to say the least.
Meanwhile, thanks to a hurricane boost that is clearly fading, let's all pretend the economy is strengthening.
Mike "Mish" Shedlock