Chicago Fed President Austan Goolsbee discussed the upcoming May FOMC meeting, the strength of the job market, and persistent inflation in an interview. Goolsbee cautioned against reading too much into his stance on interest rates, stating, “We still got a couple of weeks before the actual meeting, so if anybody imputed some specific basis points of what I was for, that’d be inaccurate.”

Goolsbee acknowledged the strong job market as the most robust part of the economy, with “unprecedented numbers,” while noting that inflation remains a concern. He said, “Inflation — there’s been some improvement, but in a way that’s the worst part of the economy,” adding that it has been “more persistent than we wanted.”

As for the potential impact of the recent failure of two US banks on the economy, Goolsbee said it is essential to monitor the extent of the slowdown. He explained, “How much squeezing is going to be coming from the bank side I think is going to matter for whether this economy is going to slow down.” Goolsbee emphasized that the intensity of the anticipated growth slowdown in the second half of the year would depend significantly on the financial sector.

Chicago Fed President Charles Evans said he’s “optimistic that the economy is poised for strong growth later this year.” By the end of next year, Fed’s goal of ful employment would be “within sight”.

However, “some even higher rates of inflation are needed to get inflation to average 2 percent and to solidify inflation expectations about that number,” he said. “So, I see the need for continued accommodative monetary policy to reach our goals.”

The conditions for tapering asset purchases, “will not be met for a while,” he added. “Policy is likely on hold for some time.”

Fed Governor Lael Brainard talked about the “new normal in the economy. One feature equilibrium interest rates will likely remain low in the future. That presents a “challenge” for “traditional ways” of conducting monetary policy. There would be “less room to cut interest rates” in recessions, and thus “less room to buffer” the economy using conventional tools. Also, inflation “doesn’t move as much with economy activity and employment” as it has in the past. The “very flat” Phillips curve makes it “more difficult to boost inflation” to target on sustainable basis.

Brainard explored some issues. One idea is so called “average inflation targeting”. That is, Fed would target inflation over a “longer period of time”. Thus, Fed would aim at inflation above target during recovery and expansion phase of a cycle, making up for the short fall during a recession. She warned that “While such approaches sound quite appealing on their face, they have not yet been implemented in practice. There is some skepticism that a central bank would in fact prove able to support above-target inflation over a sustained period without becoming concerned that inflation might accelerate and inflation expectations might rise too high.”

Another idea is that after short-term interest rates hit zero, Fed might turn to targeting “slightly longer-term interest rates”, using its balance sheet. And, similar to make-up policies, such an approach could help communicate publicly how long the Federal Reserve is planning to keep rates low.

The full speech here.

Separately, Richmond Federal Reserve president Tom Barkin said “it is hard to have a recession when unemployment is this low and interest rates are this low”. On the economy, he added “I still see us on a pretty strong course”.