Transcripts For CSPAN2 Federal 20240706

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] i guess we can get started. Thank you all for being hear, hear it is a true honor today to have chair jay powell and former chair and Nobel Laureate ben bernanke with us today. Thank you very much for being here. I very much been looking forward to this conversation or im sure our audience has come to, so lets just get to it. This conference as are the windows is to the memory of order this morning we heard some personal reflections on working with thomas from secretary janet yellen, also former chair on the fed, and from president John Williams. And both of you worked closely with thomas as well. I would like to you both an opportunity to share your own thoughts about his contributions as an economist come as a central banker come as a colleague. Then, they wouldnt show what you. Sure, its great to be here. I was his thesis advisor and he worked with me on a book on inflation targeting when he was still an undergraduate student at those long time ago and is not yet as exalted position at the fed when i was doing jays job. I dont have any short little as to give but if you want to say that i think theres were two kinds of accomplishments a person good at. They could have curriculum vitae a couple shirts and they could have what i call uag accomplishments. Curriculum vitae competence of things like publish papers and promotion and awards and recognition. You just punishments e things your family members, your kindness, your support, helping other people and so on. Thomas was one of the people, few people, who scored high on both dimensions. On the cd side, beginning with his work with me, he had a tremendous input into the Federal Reserves framework come working on inflation, targeting, work on the more recent fed framework that he did work on sure John Williams talked about his work with thomas on the natural rate. He worked on the effects of deficits on Interest Rates, again another contribution. A person made a lot of intellectual contributions that are important but as a person he was just a very warm, kind, friendly, helpful person and he was just a joy work with, and im glad to be here to say this about him. Thank you. Thank you, trevor. So first of all of you say this conference is a very fitting tribute to thomas and really honored to be part of it. Let me add my thanks to those of us who made all this happen here today. I first met thomas when it joined the board as a governor in may 2012, almost exactly 11 years ago, and in preparing to join the board in the early years of the board i was very focused on developing a deeper background in macroeconomics and Monetary Policy. Many people here at the board supported in the process, too many to name but unless it thomas really stood out and it was during the process of reading the literature and discussing that it really start to get to know him. He had this great ability to communicate, get ideas. Obviously loved talking about economics and his great enthusiasm and willingness to engage with me and you governor was immediately evident. He was very gracious to me and we had a lot of informative discussions. Some present be his teacher i was really just in those early years. As you know by the time as you noted by the time i became chair in 2018, thomas was the head of division of monetary affairs. In that role he was a trusted advisor to me and to the foc. His leadership was particularly important as he the fomc cond our first ever public Monetary Policy review. He played a major role in organizing that identifying key topics and organizing the staff all through the Federal Reserve system. He also went absolutely essential role during the critical period of the pandemic at the very beginning when we were marshaling our forces and our tools to stabilize the Financial System to protect the economy from even more dire consequences. And through it all he did come through as not just for his dedication, his great intellet and his mastery of monetary economics but also just for his kindness as a human being and just being a terrific great colleague and a great person. Thank you. I think theres a lot of agreement from both of you, appreciate that. Before we get to questions on current issues, i did what ask you both about any formative experiences that you may have had that shaped your views, particularly but to think about Monetary Policy. Paul volcker in his oral history interview tells a story of his mother who was adamant that he received the same dollar value monthly about when he was in college that his older sisters did ten years prior. Of course he was that you happy about that because inflation in the interim obviously eroded the real purchasing power of that allowance. So as the story goes that was the beginning of his personal commitment for price stability. [laughing] j, you have any stories to tell . Maybe not quite that on point but i graduate from college in 1975 during what we now call the great inflation comes in college year as ben and a sort of working as a lawyer in the Financial Sector in the late 1970s. I recall from from that time a growing sense that high inflation was essentially a permanent part of the landscape, just something that we all had to accept and deal with and that the costs of guinea admitted that were too high. So you just getting used to it. Of course old what the fed did step up and restore price stability, and one lesson from that era is price stability is really the foundation of a Strong Economy and that the economy doesnt work for anyone without stability. Another is high inflation is used when we have high inflation is the responsibility and obligation of the central bank to restore and to sustain price stability. So today while inflation isnt as high as it was when i was in college, its nonetheless far above our 2 objective. Many people are currently expensive high inflation for the first time in their lives. Its not a headline to say the really dont like it. So we are very aware that high inflation impose a significant hardship as it reduces purchasing power, especially for those who are at the margins of the economy and living paycheck to paycheck and need use all of the incoming income to pay for food, housing and transportation and other essentials. Thats why the committee is so strongly committed to returning to our 2 goal. We think the failure to get inflation down with not only prolong the pain but also increase ultimately the social cost for getting back to price stability causing even greater harm to families and businesses, and we aim to avoid that will rn steadfast in pursuit of our goals. Thank you. Ben . Well, i have mentors, stanley fish and m. I. T. But how to do something happened to me when i was six years old. I used to visit my grandparents in charlotte, north carolina, during the summer and i was sitting on the front porch of their house listening to my grandmother tell stories about her life and she told about how she raised her family in connecticut in the 1930s during the Great Depression and it was a count that was specializing in shoe manufacturing during the depression a lot of the factories were shut down. She told me that, it was a very hard time, a lot of the kids went to school in tattered shoes or maybe no shoes at all. I said grandma, why would he do that what she said because their fathers lost their jobs. Why did they lose their jobs . Because the shoe factory shutdown. I was only six usable but i could see the problem with that argument. I said why didnt they just opened the shoe factory and makes use for the children . She said it doesnt work that way. But it think what was a puzzle to me was your the same Production Capacity in 1833 that you had in 1928, 28, and in 1928 people were dancing the charleston at a 1933 they were inbred lines. That really impressed on me that economics to make a really big difference in peoples lives and Monetary Policy is like that. As jacob jake the course f you well know, that the decisions made in this building have very broad and real effect on peoples lives and for that reason, its worth studying and understanding. Thank you. I know that is certainly a key motivation for many people in this room. Working so hard. Lets now turn to some topics of more current interest and id like to start with the nexus between the Financial System and the macroeconomy. Both of you during your tenures as chair of faced very significant historic financial crises. Ben obviously you confront the Global Financial crisis and jay a global pandemic. Those episodes were clearly acute, very vivid examples of the connection between the macroeconomy in the Financial System, as well as i think a good illustration of the role of Central Banks in such episodes. Ben your Research Important and the research of inspired has really demonstrated that understanding the connections between the Financial Sector, credit markets and banks and the real economy is critical for even understanding traditional business cycles. With that as background were just experienced a time for stress in certain parts of the Banking System in the united states. I want to get your take on those developments, how you think they match up compared to previous episodes and what they might mean for the economy. Somebody mention the recent crisis was followed the standard sequence. I do know anything about Silicon Valley bank other than what ive read in the paper so please dont misinterpret this, but it was a classic situation where they had assets that were subject to risk, in particular as Interest Rates rose the value of the longterm assets fell and the capital fell. They had hoped to hedge that either deposit franchise where as Interest Rates rose and Interest Rates move more slowly on deposits, that would partially concentrate but theyre dealing with customers who were very social media savvy and that didnt really work. So after the decline in q at the second stage which is runs, people thing out the money, which ultimately led to the collapse of the bank, despite i may add the good efforts of the fed and fdic to provide liquidity and provide support for depositors. The third stage of a banking crisis is contagion. People looked at the bankston said they look sort of vaguely like Silicon Valley bank, the same number of letters in a name and all kinds of things like that. That caused people to begin to remove deposits elsewhere. And finally the reason this is important is that it ultimately affects Credit Conditions. The Federal Reserve of course is look at the effects of tank problems and of the Financial Issues on the extension of credit and, therefore, on the real economy. So in that respect its very similar to other crises. Its different from the Global Financial crisis in many ways, including its scale and scope of course but i would mention a couple of things, couple of important differences. One is the impaired asset in this case was u. S. Treasuries, which are very different assets in kind from subprime mortgages, is that u. S. Treasuries can always be valued accurately so theres not the uncertainty that was associated with subprime mortgages. And secondly as the economy declines, if it does decline, u. S. Treasuries actually become more valuable rather than less valuable so its kind of countercyclical effect. Thats one very important difference. The other worth mentioning but very important is that relative to say that gse or the Great Depression over all borrowers are in much better shape than they were in these previous episodes. That makes a big difference both in terms of stability of the banks and also in terms of the impact on Consumer Spending and the economy in general. I guess the major reason the situation didnt get worse and he think the contagion was a much content was the actions that even the Federal Reserve took through the use of your liquidity tool, including the creation of the Bank Term Funding program. However, in deploying these liquidity tools that has come at, against this backdrop with the preeminent monitor policy concern is high inflation and thats different from some of the earlier episodes and has raised renew discussions about the socalled separation principle, right . Water wanted to ask you howk about the use of Financial Stability tools and liquidity tools as the postwar tradition on a trade policy tools and how they fit together. Its an interesting question but it want to start by saying though that the overall, the banks and the Banking System are strong and resilient and wellpositioned to deal with the challenges they may face now or in the future. As you pointed out we do have separate tools, Monetary Policy to achieve our macroeconomic objectives, supervisor predatory tools. But i but i see an important distinction between the separation. Separation independence. Our tools cannot separate objectives but their effects are often not entirely independent. The tools are complementary almost all of the dead because financial macroeconomic stability are so deeply intertwined. Our consensus statement notes that sustainably achieving maximum employment and price stability depends on a stable Financial System. Because they are so intertwined to be there is not likely to be an absolute and complete separation of the tools nor is it possible or desirable. I think as bens research and the Global Financial crisis demonstrates and Financial Stability effects of economic stability and vice versa. We saw that clearly at the outset of the pandemic. As result the tools were used to address concerns in either arena can and will affect both especially during extreme circumstances. That suggests the tools a separate, they have individual purposes and most of the time each can be used for its intended purpose without comprising a compromise in the other. For example, as you pointed out when banking stresses emerge in early march we use our liquidity tools discount wind and bank Funding Program to make liquidity available to banks that might need it. That liquidity support the stability of the Financial System without restricting use of our Monetary Policy tools to promote price stability. While the Financial Stability tools help to calm conditions in the banking sector, developments of there on the other hand, are contributing to tighter Credit Conditions and are likely to wait on economic growth, hiring inflation as a result our policy rate may not need to rise as much as it would have otherwise to achieve our goals. Of course the extent of that is highly uncertain. Thank you. Of course i think the effectiveness of those tools is reflected in the fact that the fomc has raised Interest Rates twice since the emergence of the banking strain. Of course the purpose of that is to confront the inflation issue, which brings us to our next topic which, in fact, is inflation. In the pandemic in the aftermath with admitting renew discussions of the important and classic textbook distinction between supply shock and demand shocks. In particular the particular challenge of that supply shock can present to a central bank. Thats also raised a lot of questions in academia and in policy circles as to whether or not the inflation process post pandemic is going to look quite different than prior. J, maybe we can start with you. A number of folks have argued where entering a new period were supply shocks would be more frequent. Would love to hear your views on what you think thats a possibility and what that might mean for central bank. So its a great question and it is what i think we will be dealing with for quite a long time. I would say it is possible we will seek and to supply shocks. I think its very hard to forecast that with any confidence. As yogi berra is taught to said, you are the baseball expert, you can confirm or deny this, but it is difficult to make predictions especially about the future. So i think that the best we can do at this stage is probably to just identify the factors that we think can lead to further negative supply shocks. I will say that though some positive supply shocks related to globalization largely probably contributes individually to the time of low inflation that either ended or was interrupted by the onset of the pandemic. Im thinking there of the vast increase in global labor supply, the development of efficient Global Supply chains facilitated by technological advances and things like that. I would say those positive supply shocks do not seem likely to be repeated. At the same time the drivers of the current inflationary surge certainly include a sequence of large negative supply shocks to Global Supply chain for goods which also experienced a large and persistent shift in demand of services and goods and also display of workers on top of that. Russians were in ukraine brought for the shocks to Global Supply chains particularly energy and nonenergy commodities. We cant know how persistent though shocks will be or whether further negative supply shocks will come along with a globalization the partially or fully halted or reversed . Will resume again as the pandemic mercifully receipts in the memory . We cant really know that now. But for policymakers about my is that Central Banks will continue to be responsible for providing price stability and that will require us to navigate whatever additional supply shocks do occur. So as thomas and ben and her coauthors wrote in the inflation targeting book come what a central bank can do is control inflation. That is to overtime even in the present of supply shocks should they come. Ben, love to hear you on the. So unusual events which disrupt normal economic function often are followed by inflation. Examples are world war i, world war ii, the korean war and now the pandemic. The pandemic is makes it harder for policymakers to understand whats happening and to react. Appropriately and in particular the pandemic scramble the labor market, made it harder to judge the state of labor market. The opening led to a very extended rise in Commodity Prices which was difficult to deal with. We had supply chain issues which was a pretty much anything which is also a contributor to inflation. There are many features of the pandemic that made this usual episode and difficult episode to address. That being said i think that and ive done some research on this, the basic mechanisms i think are still the same but if you have a bunch of bad shocks thats going to give you problems of the underlying mechanisms of supply shocks and tight labor markets and so on are really the same. I dont think its been a major change in the underlying process that generates inflation, only a series of shocks we live to the that gave us this episode. Going forward i agree with jay we cant predict what new shocks will. Weve got new technology out there that might make the changes in our economy. Weve got green investor can think like that that might affect the price and availability of fossil fuels and so there many, many things that we cant predict. I think broadly speaking that inflation process is not changed and one aspect of that which is very good news is that the Federal Reserve credibility has helped keep Inflation Expectations particularly longterm, well anchored which is a first step in getting control of inflation. You mentioned the role of the labor market, tightness in the inflation process. I think its quite striking that on the eve of the pandemic the Unemployment Rate was rent 3. 5 . Five decade alone. Yet at the same type inflation was kind of struggling to get up to 2 on a sustained basis. Here we are in 2023, the Unemployment Rate is roughly at the same level as it was prior to the pandemic but, of course, inflation is far above 2 . So in that context, should we be thinking about the relationship between slack in the labor market at inflation differently . Do we not have the right measures in slack . Is a problems with understanding with the natural rate of unemployment is . Or his slack really not the key to understanding inflation in the first place . As i was talking about before, i think that the pandemic to some extent scrambled the usual signals to the labor market. The Federal Reserve overtime has begun to put more weight of things like the vacancy to unemployment ratio which seems to give a better signal in the time of change when the labor market matching process is in change, then the Unemployment Rate. So there has been some scrambling of those signals. That being said, its simply not true that even, people who understood since the 70s that theres not a simple inverse relationship between inflation and unemployment, and particular what can break the relationship is supply shocks. During the 70s we did particularly up tight labor markets most of the time. We had high inflation because with oil price shocks, which the fed did not respond to adequately. Because Inflation Expectations were not well anchored, and there was a strong tendency for price increases to feed into wage increases to feed into price increases. So because of the present of supply shocks and Inflation Expectations dynamics, theres a reason why low unemployment and high inflation cant coexist. But the remedies might be, depending on the situation, might be somewhat different. Jay, how are you think about that. Was very much in agreement. Its true we had both before and after the pandemic inflation, sorry, unemployment very low, close to 3. 5 is five are simple really have high inflation after the pandemic. Does that mean our understanding of the relationship between slack and deflation is badly wrong or that it is change fundamental at the pandemic . My answer would be tentatively no to both of those questions. What really is different this time was a series of unexpected and persistent supply shocks that featured in the inflation process. I dont think labor market slack was a particularly important feature of inflation when it first spite in spring of 2021. By contrast, do you think labor market slack is likely been increasingly important factor in inflation Going Forward, in, in particular inflation and on Housing Services is showing signs of real persisted in this highly diverse sector. Labor costs are a high proportion of total costs and that sector happens to account for more than half of the court pce index. All of this, the point is all of this can be explained using our standard framework for understanding labor market slack. You could say it this way, that the natural rate of employment probably rose sharply as the pandemic severely disrupted the labor market. The implication of that would be that, and anna palmer rate of say 4 indicated a much tighter labor market in 2021 than it did in 2018. And as bens budget after the pandemic we began looking at much more closely at alternative measures particularly vacancies but also quits which a bid signaling even greater tightness than the Unemployment Rate, mightve thought to a signal. To put some numbers on it, at the end of 2018 at the end of 2021 we had 4 roughly on a plymouth unemployment in both cases. In 2018, the vacancies to unemployment ratio was one to one essential. In 2021 it was two to one and that was a much better indicator obviously at that time of the simple standalone Unemployment Rate, although as image and you could also think of it as a natural rate being highly elevated. The other thing is, and may also be the case the phillips curve has steep and, meeting inflation has returned at least for now to being more responsive to changes in the labor market. Labor market slack. But the phillips curve was one thought to be fairly steep after flattening relationship in the economy like the phillips curve evolve over overtimes i wot characterize that as a problem for our understanding of inflation. Very good, thank you. Maybe we can pivot here to the topic of central bank communications. Its widely understood now that the better the public understands the conduct of Monetary Policy, the more effective it will be but fostering that type of understanding really requires a lot of communications and discourse that can be hard. Both of you have been powerful advocates for dancing Monetary Policy communications, both with an eye towards making policy more effective but also for the purpose of promoting transparency and accountability. Ben you have played a Critical Role here advancing the fomc communications, including the introduction of press conferences after meetings, the introduction of the projections. So what changes over this period since the key mitigations say revolution began when you highlight is being some of the most effective most important and where do some remaining challenges exist . You need to understand its as multiple purposes. What if its purposes is to try to align Market Expectations with the feds own thinking. I think that goes back to Alan Greenspan can go back to 1994 the first fomc statement. Since then the fed has tried at least to give some indication of what its thinking of what it sees the rest of the economy. But beyond that jamaican transparency transparency and accountability. This is a powerful institution. Its very important to be accountable to the congress and to the public and the best way to do that is to explain what we think, what were doing, and how were going to go about that. Theres other reasons for communication. One i would talk about is feedback where having a conference here. If the fed puts out the issues that its concerned about, economists will write articles or tweet and respond to that, or in the case of the fed loosens program maybe it would be more ordinary people who are explaining how Monetary Policy affects them. One final thing i would mention is diversity of views. Because of the fed has a consensus culture and there are very few dissents normally, the outside perception is the fed is subject to groupthink which of course is possible but with people talking about their own views and explaining why they see the economy as they do, it does i think at least to some extent show that there is a range of opinion on the committee. In terms of tools, i guess i do feel proud about the press conferences, which are introduced four times a year after the summary of Economic Projections which chair powell has taken to an art form. [laughing] and i think also just the inflation target, the forecast that we released and theres a cultural change which some people dont like but i think is good, which is that used to be if you look back at speeches in the greenspan era, the president of the Federal Reserve bank of minneapolis would talk about harvests or something, wouldnt talk very much about the global or national economy. Now you have a lot of people talking about different aspects of the Federal Reserves views, and again that contributes to both market transparency and also to accountability to the local constituency and to the national constituency. Jay, you of course have continued to push for it on the communications and transparency front. Welcome your thoughts. I think the broader setting is that transparency is especially important today. Polling data show that many important public and private institutions globally have struggled to retain the Publics Trust and support in recent years. We are an institution that serves a critical Public Mission but to be here in worker is to know that the particulars of what we do and how we do it are not generally top of mind for most people. So that we can earn and deserve their trust and support. Thats Equitable Task if we are going to sustain democratic legitimacy through this interesting period. My colleagues and i take that as a proactive obligation and not something that is a second order of importance. In that spirit to your point we followed the example of chairman greenspan beginning in 94, through his innovations and janet as well looking to foster Greater Transparency and accountability. We do a press conference after every meeting, not just every other one. Weve greatly expanded our personal outreach to be certain we hear from lawmakers so that they have the information they need to conduct appropriate oversight. I mentioned in 201920 the Monetary Policy framework seeking input from a broad range of people all around the country. We significantly expanded transparency beyond Monetary Policy. We publish the mantle Financial Regulation reports. Of course there are always communication challenges especially about communicating the uncertainty about Economic Conditions and the outlook and a good example of this is despite persistent efforts to explain otherwise, the policy paths from the sec seem taken as a firm plan or Committee Decision rather than what they are witches individual participants best assessments on a particular day of appropriate policy on the assumption conditions evolve in line with their baseline forecast. That is just the challenge we constantly face in the context. Despite that i would say the summer of Economic Projections is useful in this tightening cycle as markets lookahead and pricing in future rate hikes long before that. Your last point brings up the point of effective policy tools and the key element of that is the use of Forward Guidance. One is a tool that should only be deployed when Interest Rates are lowered so the accommodation goes further communicating about the policy in the future. But another school of thought is a regular part of communicating with the public to convey policies even far away from the role of the house. Where do you come out in that . Depends on circumstances. Forward guidance, it is materially different or clearer view of the path of policy. I would agree the lower bound to provide more stimulus by intent to keep policy accommodated. I also would say communication comes with misinterpretation and may limit flexibility. We should use Forward Guidance sparingly in the course of policy, either reasonably well understood are dependent on the uncertain future developments the little can be said about the future and a good example of that, march 2020 the pandemic shutdowns were just beginning, the level of certainty was unimaginable and we chose not to issue sats at that point. Releasing a forecast at that time might have been more of an obstacle to Clear Communication than a help. In contrast as i mentioned a minute ago Forward Guidance has been a useful and effective tool during the current tightening sick agile as Financial Condition steak dinner advance of natural rate increases. The 2year tightening between september 2021 and march 2020 by 200 basis points before we listed rates and that is because of our communication. In the current context it has been relatively clear that further policy firming would be warranted and further guidance said so. Now weve come a long way and the expense of policy is restrictive and we face uncertainty about the lack of tightening so far and the extent of credit tightening from banking stresses so today our guidance is limiting to identifying the factors we will be monitoring to assess the extent to which additional policy firms return inflation to 3 over time. As noted, that assessments will be an ongoing one as we go meeting by meeting. Having come this far we can look at the data and evolving outlook. Thank you. You mentioned guidance could be useful at times when the public may expect a very different policy from policy makers. How do you think about those certain situations . Recently it has been the case markets place a different rate path. But i would think that does not reflect a misunderstanding of our reaction function or lack of belief that we will do whats necessary to bring inflation down. Rather it reflects different forecasts, one in which inflation comes in more quickly than Committee Participants think is most likely perhaps due to a significant downturn. I would say also the data have continued to support the Committee View that bringing inflation down will take some time. Moreover, something we often dont think about is market prices always reflect growth expectations and compensation for risks. What Market Participants say is closer to the views of the sec than is reflected in the marketplace. So ultimately my colleagues and i have our forecast, Market Participants have theres. Our role is not to advocate for our forecasts. What we can do is be clear about expectations for growth, unemployment and inflation and likely implications, we want the public to understand how policy would react if the economy were to differ from expectations and we have individual forecasts. What would your take away be for the past couple decades . Charlie evans and coauthors made useful distinction for Forward Guidance, a decision Forward Guidance is a commitment toward guidance which is rarely used but typically is lower bound where the central bank promises to do something and its credibly is on the line that will follow a certain path Going Forward and that is a way of getting more stimulus and that goes back to Alan Greenspan, to indicate certain paths are very likely and helps achieve the objectives. Delphic Forward Guidance is a forecast, heres what we think, tomorrow we might think Something Different but we are trying as part of our transparency to give you a sense of where the economy is going and how we think policy will react. There are problems in practice. People dont understand the difference all the time between a commitment and a forecast. That is something jay has emphasized and should be emphasized that. Another is people underestimate the amount of uncertainty involved which is enormous. I dont think you can do without some Forward Guidance because the idea of transparency says heres what we see and heres why we are thinking, the idea that there is no guidance at all most of the time, take march 2020, most of the time you want to get a sense of where you think the economy and policy are heading. If i could editorialize one more minute. One of the issues is the fomc is so large that it is difficult to come up with the collective committee forecast. I tried to do that when i was chair. It is a compromise which is not ideal. Other banks to other things. Committee forecasts are voted on or use market rates or publish staff forecasts. There are different ways but Forward Guidance is an instrumental tool but letting people know how Central Bank Sees the situation even if theres a lot of uncertainty, normally is part of transparency. You highlighted uncertainty being a key factor in this issue. Uncertainty is a pervasive feature of Monetary Policy that often invokes the socalled Risk Management approach. We start with this topic, but federal funds rate by 5 percentage points, thats rapid pace by historical standards. How do you view those actions in the context of uncertainty you and the committee face and how does Risk Management factor into it . I will start by remembering Alan Greenspan famously said that pervasive uncertainty was the defining characteristic of the policy landscape. He made that comment during what we think of as the great migration. That statement has never been more apt than it is today. If you look back at the pandemic, the global shutdown, historically forceful response at all of that had no precedent. It has been a time of historically elevated uncertainty. No economy ever faced a shut down and reopening and all of them would face at the same time. No matter what happened the outcome was going to be questionable. This level of uncertainty pose challenges for policy and policy communication. We had been and will to respond to the evolving situation. We wanted to be as clear as possible lest we had to uncertainty so policy has been nimble consistent with expectations. The data showed declining inflation through september 2021 but then turned decisively against that. In response we accelerated our policy, ultimately as you noted raising rates by 500 basis points. Over this period we communicated that the object was to reach a policy that is sufficiently restrictive to return inflation to 2 over time. We also communicate the level of rates that would be required was uncertain. Until very recently it has been clear that further policy affirming would be required as policies become more restrictive, the risks of doing too much or little were becoming more balanced and our policy has adjusted to reflect that fact so we havent made any decisions about the extent to which additional policy is appropriate but given how far we have come we can look at the data and evolving outlook and make careful assessments. Reporter when he became a policymaker you were well versed in academic literature. From that side to this side. Uncertainty when it is gaussian or not. In actual policymaking we dont know what the Current Quarter gdp is because it will get revised several times down the road. I remember when i was sitting as a member of the board and greenspan was in the chair and we responded to some inflation data and a little later it turned out that inflation change had been revised away and i asked the chair do you think we can revise our Interest Rate policy . It is very difficult. Got a laugh with that, but trying to make policy involves not just uncertainty about data, the model, all the things that can happen, the social and economic and political environment. It is very difficult and unfortunate your fortunately given that Monetary Policy works as a lag, given there are risks on both sides of the mobile forecast, not much choice but to accept that uncertainty and do the best you can, be ready to adjust. Very good. We are getting close to the end of our allotted time. Maybe we could wrap up with a question looking ahead. What would you point to for the key issues that will be most relevant to Research Community as well as the Boston Community . I would start with the labor market and what we talked about earlier. Vacancies in particular in the beverage curve and the discussion over whether the extraordinarily high surplus demand in the labor market is through the vacancy channel without a significant belief in unemployment that would be more can to what is happening in all fire cycles. That is going to be a question we will resolve empirically but we are learning new things about the workings of the labor market at least in this situation. On Monetary Policy it is going to be interesting to look back and try to understand how inflation spread from what was very focused on the good sector due to the rotation of demand of services and her medicine out of support goods purchases got from fiscal and monetary stimulus. How did it spread than into the Service Sector where it significantly resides . We see much progress on goods and progress in the pipeline. But where we see this inflation, what is the mechanism by which that happens . You have the last word. One thing that i would urge researchers to look at is the relationship with Monetary Policy and instability. A complex relationship. Everybody has a strong opinion about this subject that dont necessarily correlate. Someone once said the things you dont know can hurt you as much as the things you know for sure but dont think so. I think we do not understand to the extent we need to the relationship between different aspects of Monetary Policy. This taking Balance Sheet behavior etc. It is something, a lot of good work being done, but we need to understand much better what the channels are to quantify the relationships to think about what extent we need to take that into account. Very good. Let me thank you for sharing your perspective. The highlight of our conference. Thank you very much. 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