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Below are some key takeaways from the speech delivered by the FOMC Chairman Jerome Powell  at the “Revolution or Evolution? Reexamining Economic Paradigms” 60th Annual Meeting of the National Association for Business Economics, Boston, Massachusetts.

  • Better conduct of monetary policy over the past few decades, have greatly reduced, but not eliminated, the effects that tight labor markets have on inflation.
  • The baseline forecasts of most FOMC participants and a broad range of others show unemployment remaining below 4 percent for an extended period, with inflation steady near 2 percent.
  • If the natural rate is now materially lower than we believe, that would imply less upward pressure on inflation–the flip side of the “revenge of the Phillips curve” risk.
  • Our policy of gradual interest rate normalization represents the FOMC’s attempt to take both of these risks seriously.
    • Removing accommodation too quickly could needlessly foreshorten the expansion.
    • Moving too slowly could risk rising inflation and inflation expectations.
  • Our path of gradually removing accommodation, while closely monitoring the economy, is designed to balance these risks.
  • Our ongoing policy of gradual interest rate normalization reflects our efforts to balance the inevitable risks that come with extraordinary times, so as to extend the current expansion, while maintaining maximum employment and low and stable inflation.