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Excerpts from James Bullard, St. Louis Federal Reserve Bank CEO & President; Loretta Mester, Cleveland Federal Reserve President; and Stanley Fischer, Federal Reserve Vice Chair
James Bullard, St. Louis Federal Reserve Bank CEO & President
BULLARD ON RATES
OUR FRAMERATE DOES CALL FOR A RATE RISE, BUT I'M AGNOSTIC ON EXACTLY WHEN WE DO THAT. I DO LIKE TO MOVE ON GOOD NEWS ABOUT THE ECONOMY, SO IF WE GOT TO A MEETING AND WE FELT LIKE THINGS WERE LOOKING STRONGER, THAT MIGHT BE A GOOD TIME TO DO THAT.
BULLARD ON BUBBLES
BULLARD: I'M NOT IGNORING IT. I'M SAYING FOR FORECASTING PURPOSES, I'M WRITING DOWN A BASELINE FORECAST, ITS ASSUMING NO BUBBLES, AND I'LL HAVE TO MAKE A JUDGMENT ABOUT WHETHER I THINK THERE'S A BUBBLE.
LEISMAN: WHAT IS YOUR JUDGMENT ON THAT?
BULLARD: I THINK WE'RE FAIRLY VALUED OR IN THE HIGH SIDE OF FAIRLY VALUED AND I COULD SEE THE PROCESS GETTING AWAY FROM US. MAYBE TECH STOCKS, MAYBE OTHERS. I DON'T KNOW.
BULLARD ON LONG RUN OUTCOME
WE DON'T HAVE ANYWHERE NEAR THAT KIND OF CERTAINTY ABOUT WHERE THE LONG-RUN OUTCOME IS FOR THE U.S. SO WHAT'S HAPPENING IS, PEOPLE ARE PUTTING IN THEIR TAILOR RULES AND THEN THEY'RE SAYING, WELL, GAPS ARE ABOUT ZERO, RATES HAVE TO GO BACK TO NORMAL LEVELS, WHICH IS SOME SORT OF AVERAGE OF THE PAST. THIS REGIME IDEA SAYS, WELL, WE'RE NOT EXACTLY SURE WHERE THE ECONOMY'S HEADING. SO WHAT WE'RE GOING TO DO IS MAKE THE RIGHT POLICY FOR TODAY'S REGIME, WHICH IS VERY LOW REAL INTEREST RATES ON GOVERNMENT PAPER, AND VERY LOW PRODUCTIVITY. A SLOW GROWTH, LOW INFLATION ECONOMY. AND WE'LL MAKE POLICY RIGHT FOR THAT.
BULLARD ON MOSKOVITZ
I THINK DUSTIN MOSKOVITZ SHOULD BE HERE. I MEAN MAYBE HE CAN HELICOPTER IN FROM SUN VALLEY. WHY IS HE SENDING ALL THESE PEOPLE. IF HE WANTS LOW INTEREST RATES, WHY DOES HE JUST COME AND ARGUE ABOUT IT.
Loretta Mester, Cleveland Federal Reserve President
MESTER ON STRENGHTNING
I THINK WE WILL HAVE SOME STRENGTHENING IN THE SECOND HALF OF THE YEAR YES. I THINK THE ECONOMY IS ON A GOOD TRACK I THINK THE EMPLOYMENT NUMBERS, YOU KNOW, SHOW THAT I THINK THE INFLATION NUMBERS ARE COMING UP SLOWLY THEY ARE BELOW OUR TARGET STILL BUT THEY ARE MOVING IN THE RIGHT DIRECTION.
MESTER ON THE ECONOMY
I REALLY BELIEVE THE ECONOMY IS STILL ON TRACK FOR A PICKUP IN GROWTH IN THE SECOND HALF OF THE YEAR INFLATION MOVING GRADUALLY BACK TO 2 PERCENT OVER TIME AND THE UNEMPLOYMENT RATE GOING DOWN A LITTLE BIT FROM WHERE IT IS NOW SO GIVEN THAT FORECAST CONSISTENT WITH THAT I SEE A GRADUAL YOU KNOW UPWARD PACE IN INTEREST RATES AS BEING APPROPRIATE.
MESTER ON DATA
MY FRAMEWORK FOR DOING POLICY IS I LOOK AT A MEDIUM RUN FORECAST I LOOK AT THE DATA AND I LOOK AT A LOT OF DIFFERENT DATA NOT JUST ONE DATA REPORT I LOOK AT THE TRENDS IN THE DATA AND I INFER AND TRY TO PREDICT WHAT THE MEDIUM RUN FORECAST IS AND THEN I BACK OUT WHAT WOULD BE THE APPROPRIATE PATH OF POLICY AND IN MY APPROPRIATE PATH IT'S A GRADUAL INCREASE.
MESTER ON THREE PERCENT
I THINK WE CAN DOING IT BECAUSE THE FIRST HALF IS WEAK AND WE HAVE MOMENTUM AND WE HAVE SOME UNDERLYING STRENGTH AND WE NEED SOME OF THE INVENTORY ADJUSTMENT WILL COME BACK IN THE SECOND HALF OF THE YEAR.
Stanley Fischer, Federal Reserve Vice Chair
FISCHER ON THE ECONOMY HAS STRENGTHENED
WE'VE HAD VERY STRONG HIRING REPORTS IN THE LAST THREE MONTHS. ON AVERAGE AS THE CHAIR SAID, 190,000 HIRES A MONTH. WE HAVE ANOTHER ONE OF THOSE REPORTS COMING OUT NEXT FRIDAY. AND THAT WILL PROBABLY WEIGH IN OUR DECISION ALONG WITH OTHER DATA THAT MAY COME IN. SO I THINK THE EVIDENCE IS THAT THE ECONOMY HAS STRENGTHENED. THE PROBLEM WITH THIS ECONOMY IS THERE ARE SO MANY NUMBERS EVERY DAY.
FISCHER ON THE NUMBERS
WE WANT TO BE LOOKING AHEAD WHEN WE MAKE THIS DECISION, NOT BACK. WE'RE REASONABLY CLOSE TO WHAT IS SORT OF THIS FULL EMPLOYMENT AND INFLATION RATE THIS YEAR IS HIGHER THAN LAST YEAR'S. IT'S STILL NOT UP TO TWO PERCENT. BUT IT'S BEEN GROWING, SO YOU ASK WHAT ARE THE BIG NUMBERS THAT WE LOOK AT. THE BIG NUMBERS ARE BETTER THAN THEY HAVE BEEN FOR SOME TIME. AND WE'RE GETTING SOME REINFORCEMENTS FROM WHAT'S BEEN HAPPENING ON A MONTHLY BASIS.
FISCHER ON THE FED
I DON'T THINK THE FED IS BEHIND THE CURVE. I THINK WE'RE IN A PLACE WHERE WE OUGHT TO BE. WE'VE CHANGE OBVIOUSLY AS THE ECONOMY WAS REASONABLY WEAK FOR SOME TIME AND FURTHERMORE AS INFLATION WAS VERY SLOW TO RISE.
FISCHER ON PRODUCTIVITY GROWTH
THE BIG ISSUE IN GROWTH AT THE MOMENT IS NOT EMPLOYMENT. IT IS INVESTMENT TO SOME EXTENT. BUT TO AN EVEN GREATER EXTENT ITS PRODUCTIVITY GROWTH. AND THAT IS EXTREMELY HARD TO FORECAST SO SOMETHING MIGHT HAPPEN AND ONE SEES WHEN ONE LOOKS AT THE DATA THAT PRODUCTIVITY CHANGES SEEM TO COME SOMEWHAT IN STEPS. AND WE HAVEN'T SEEN MUCH CHANGE. IN FACT WE'VE SEEN IT GOING THE OTHER WAY. SO THAT TO ME IS THE CRITICAL QUESTION WITH REGARD TO GROWTH. WHAT OUR AIM IS EMPLOYMENT AND WITH THAT WE'RE DOING WELL.
FISCHER ON THE FED NOT BEING A POLITICAL BODY
WE LOOK AT THE ECONOMY AND IF THERE ARE IMPLICATIONS FOR INSTANCE GREATER UNCERTAINTY ABOUT WHAT'S GOING TO HAPPEN, WE'LL SEE THOSE SIGNS IN THE MARKETS. WE'RE GOING TO LOOK AT ECONOMIC SIGNALS. WE'RE NOT GOING TO JUST BECOME POLITICAL FORECASTERS AND THE FED IS RESOLUTELY NOT A POLITICAL BODY.
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