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Speech
Important choices for the Federal Reserve in the years ahead: remarks at Lehman College, Bronx, New York
Remarks at Lehman College, Bronx, New York.
Briefing
How Do Demographics Influence r*?
Demographic trends are evolving in the U.S. as well as globally, potentially affecting the behavior of interest rates. This includes the natural rate of interest, denoted r*. Through the lens of a simple model, we describe supply and demand channels through which these demographic trends may affect r* and show a range of estimates for the potential quantitative impact.
Discussion Paper
The Post-Pandemic r*
The debate about the natural rate of interest, or r*, sometimes overlooks the point that there is an entire term structure of r* measures, with short-run estimates capturing current economic conditions and long-run estimates capturing more secular factors. The whole term structure of r* matters for policy: shorter run measures are relevant for gauging how restrictive or expansionary current policy is, while longer run measures are relevant when assessing terminal rates. This two-post series covers the evolution of both in the aftermath of the pandemic, with today’s post focusing especially ...
Speech
Remarks at the 2015 U.S. Monetary Policy Forum
Remarks at the 2015 U.S. Monetary Policy Forum, New York City.
Briefing
Will Interest Rates Remain Elevated Even as Monetary Policy Normalizes?
Long-term bond yields indicate an increase in long-run r* of between 1.2 and 1.4 percentage points relative to its pre-pandemic level. This increase in r* is compatible with underlying economic shifts following the pandemic, including a reduction in personal savings by U.S. households. Evidence suggests that, even as inflation returns to trend and monetary policy normalizes, policy rates may remain above their prepandemic level.
Briefing
What Is Trend Inflation?
I discuss three models of trend inflation that deliver strikingly different estimates of the trend.I argue that the concept of trend inflation is largely model and context dependent.Current estimates of trend inflation show no clear pattern about price pressures.
Briefing
Stablecoins and the Demand for Dollars
Whether stablecoins threaten or reinforce the dollar's global role depends critically on how they are backed: Reserve-backed stablecoins increase demand for U.S. Treasuries, while crypto-backed ones reduce it.As stablecoin adoption broadens, investors place greater weight on safety and liquidity, making reserve-backed issuance dominant in the long run and putting downward pressure on the natural rate of interest.What initially appears to be a challenge to the dollar can — under plausible institutional arrangements, such as those required by the GENIUS Act — become a force that strengthens ...
Speech
The U.S. economic outlook and monetary policy
Remarks at the Economic Club of New York, New York City.
Journal Article
When Economists Navigate by the Stars
Monetary policy is often likened to steering a ship. For instance, the key economic policy concept of "commitment" is often visualized as Odysseus listening to the Sirens' call while tied to the mast of his ship; analysis and interpretation of the data often seems like the process of navigation by the currents, the wind, and the sky. Indeed, Fed Chair Jerome Powell suggested in August that monetary policymakers are frequently "navigating by the stars under cloudy skies."But what good is celestial navigation if the navigator cannot see the sun or the stars because of clouds? The Vikings, ...
Report
Safety, liquidity, and the natural rate of interest
Why are interest rates so low in the Unites States? We find that they are low primarily because the premium for safety and liquidity has increased since the late 1990s, and to a lesser extent because economic growth has slowed. We reach this conclusion using two complementary perspectives: a flexible time-series model of trends in Treasury and corporate yields, inflation, and long-term survey expectations, and a medium-scale dynamic stochastic general equilibrium (DSGE) model. We discuss the implications of this finding for the natural rate of interest.