Powell’s swearing-in remarks (2/13) were typical for an incoming Chairman. He reiterated the importance of Fed independence: “Congress has wisely entrusted us with an important degree of independence so that we can pursue our monetary policy goals without concern for short-term political pressures.” As for current conditions, he noted that “Monetary policy has continued to support a full recovery in labor markets and a return to our inflation target; we have made great progress in moving much closer to those statutory objectives.” He also said, “We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery and sustaining the pursuit of our objectives.” Last, he emphasized that the Fed remains “alert to any developing risks to financial stability.”
Mester, who has been reported to be a candidate for Board Vice Chair, commented on the implications of recent fiscal actions (2/13). In her view, fiscal policy posed an upside risk to her forecast: “I think that there’s more salient upside risks to the forecast than we’ve seen in quite a while.” She saw a material impact on growth and saw upside risks to her estimate. As such, “the gradual path is my modal forecast, but I do think we have to be very observant of how the economy is evolving.” She noted that, “If economic conditions evolve as expected, we’ll need to make some further increases in interest rates this year and next year, at a pace similar to last year’s,” which would mean three hikes per year. She did not see recent equity market developments as affecting her view of consumer confidence or spending. Her view of r-star was that its short-run value would increase as the expansion continues.