Federal Reserve Lecture Notes

Introduction

• Focus on achieving dual mandates: maximum employment and stable prices.
• Economy has progressed towards these goals over the past two years.
• Labor market balancing, low unemployment, inflation reduced from 7% to 2.5%.
• Commitment to bringing inflation down to 2%.

Current Monetary Policy

• FOMC decided to keep policy interest rate unchanged.
• Continuing reduction of securities holdings.
• Maintained restrictive monetary policy to align demand with supply and reduce inflation.
• Risks on both sides of the dual mandate monitored.

Economic Developments

• Economic activity expanding at a solid pace.
• GDP growth moderated to 2.1% in the first half of the year.
• Consumer spending slowed but remains solid.
• Investment in equipment and intangibles increased, housing sector stalled growth in Q2.
• Improved supply conditions support demand.

Labor Market

• Supply and demand conditions better balanced.
• Payroll job gains averaged 177,000 jobs per month in Q2.
• Unemployment rate risen slightly but remains low at 4.1%.
• Increase in worker supply due to participation and immigration.
• Nominal wage growth eased, jobs-worker gap narrowed.
• Labor market indicators returned to pre-pandemic levels.

Inflation

• Inflation eased but still slightly above the 2% goal.
• Total PCE prices rose 2.5%, core PCE prices 2.6%.
• Long-term inflation expectations appear well-anchored.

Federal Reserve's Commitment

• Maintaining federal funds rate at 5.25-5.5%.
• Prepared to adjust policies based on evolving data.
• Caution about reducing policy restraint prematurely.

Questions from the Press

• September Rate Cut: Decisions are data-dependent, likely if current conditions persist.
• Labor Market Equilibrium: Watching for normalization, prepared to respond if conditions deviate.
• Balance of Risks: Balancing between inflation and employment objectives.
• Unemployment Concerns: Monitoring for any significant downturn.
• Anecdotal vs. Hard Data: Both are considered in assessing economic conditions.

Closing Remarks

• The Fed remains apolitical in its decisions.
• Decisions will be based on data, outlook, and balancing risks.
• Commitment to maximizing employment and ensuring price stability continues to guide actions.