The blackout period on Fed policymaker remarks ended after last week’s FOMC meeting. Kashkari commented on the relationship between the timing of the next rate hike and the announcement of balance sheet runoff. Kashkari believed that the balance sheet “isn’t doing a lot to boost the economy right now,” while with respect to the fed funds rate, he described the FOMC as having thought: “Let’s not do anything with interest rates, let’s wait to see more data.” Kashkari also pointed to the inconsistency between the strong job market and weaker inflation data: “The job market continues to be strong. But it’s really curious, we had expected to see wages [growing more quickly].”
Fischer gave a speech on the implications of low interest rates, both in the U.S. and in other countries. He pointed to “elevated uncertainty, both political and economic,” as likely a cause of the “tepid response of capital spending to historically low interest rates.” He argued that “transparent and sound monetary policy can boost confidence in the stability of the growth outlook, an outcome that can in turn alleviate precautionary demand for savings and encourage investment, pushing up the equilibrium interest rate.” But he also warned that “Policies to boost productivity growth and the longer-run potential of the economy are more likely to be found in effective fiscal and regulatory measures than in central bank actions.”
Randal Quarles, who is President Trump’s nominee to the position of Fed Governor and Vice Chair for Supervision, testified at his confirmation hearing last week (click here for our commentary). Quarles’s appointment to the Fed will likely have no implications for the conduct of monetary policy. We don’t see his earlier advocacy of policy rules as making monetary policy likely to be more hawkish than otherwise.