Fed Governor Randal Quarles said in a speech yesterday that monetary policy shouldn’t “drift” because of the uncertainties around many macroeconomic inputs Instead, Fed policymakers should “chart a course that is stable, gradual, and predictable; communicate it clearly; and then follow that course through the temporarily shifting and sometimes conflicting signs from the economy”. And, to him, given that “the economy has performed fundamentally as I expected”, the “right strategy is to maintain the gradual course”.
On the one hand, the “productive capacity” of the US might be increasing so there is no need to “accelerate our pace”. On the other hand, there there is enough doubt that “current inflation as an infallibly reliable measure of current resource constraints”. Hence, “continued gradual removal of accommodation is appropriate.”
Quarles’ full speech “Don’t Chase the Needles: An Optimistic Assessment of the Economic Outlook and Monetary Policy“.
