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Randal Quarles, Vice Chairman of the Federal Reserve for Supervision, reaffirmed Thursday the gradual course of monetary policy of the central bank, saying that decision-makers should avoid focusing too much on indicators with a degree of uncertainty high.
Speaking before the New York Economic Club, Mr Quarles said his prospects have not changed much since February. The US economy is still "in a good position," he said, and there is good reason to be optimistic about the potential capacity of the economy.
"As the potential growth of the economy increases, we will be able to phase out the adjustment measures of monetary policy," he said.
Quarles warned, however, that inflation may not be as reliable an indicator of the potential overheating of the economy as before. He said he expected that relatively strong growth could continue without encountering economic constraints, but said the Fed should pay attention to other indicators of tightening and overheating in addition to inflation, such as direct measures of the use of manpower or signs of shortage and bottlenecks in production.
Greater uncertainty does not mean that policy makers are without a clear guide, or that the policy itself may be drifting, he said. This means that Fed officials should "chart a steady, gradual and predictable trajectory," and continue as follows "unless a strong and consistent signal requires a firm but moderate correction."
Mr. Quarles compared central bankers to pilots examining an aircraft control panel, when navigation instruments were not as sophisticated as they are today. The needle that traces the course of the pilot can err for a number of reasons.
"The first rule that was taught to us as young drivers was:" Do not chase the needles, "said the amateur driver.
"In other words, although I think there is enough reason to think that the productive capacity of our economy could increase so that we should not feel compelled to accelerate our pace, I also think that There is sufficient doubt about current inflation as an infallible factor. a reliable measure of current resource constraints, according to which continued phasing out of development is appropriate, "he said.
Fed officials raised their federal funds benchmark rate by a quarter of a percentage point last month, to somewhere between 2% and 2.25%. Officials have scheduled a further rate increase this year and three more in 2019.
Write to Kate Davidson at [email protected]
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