The only policymaker comment released last week was from Rosengren (Sep. 17). He reiterated his warning about testing the limits of a hot labor market and indicated a willingness to enter restrictive territory to avoid excessive overheating: “If the economy is growing when we get to 3 per cent then I wouldn’t necessarily stop just at 3 per cent — if it is growing strongly enough that I think labour markets are going to tighten and inflationary pressures will pick up.”
However, he saw the outlook for monetary policy as quite uncertain beyond the near term: “I don’t think we can provide guidance when it is not as clear what we are actually going to do. You can imagine getting at a point after a few more tightenings where there is going to be less certainty about what the next move would be.” He warned, “We have essentially no success historically in guiding the unemployment rate back to full employment without going well past that and getting into a recession.”
Rosengren also cautioned on financial stability, saying, “We do need to be concerned about financial excesses.” Specifically, though he didn’t see a “gigantic bubble that is obvious to everybody,” commercial real estate and some aspects of corporate fixed income appeared “a little bit easy” to him. He saw the Fed’s macroprudential toolkit as limited in its ability to address financial excesses, and therefore wanted monetary policy to be tighter than otherwise, “to lean against the wind a little bit.”