Jerome H Powell: Opening remarks - "Monetary Policy in a Global Economy"

Opening remarks by Mr Jerome H Powell, Chair of the Board of Governors of the Federal Reserve System, at "Monetary Policy Challenges in a Global Economy", a policy panel at the 24th Jacques Polak Annual Research Conference, hosted by the International Monetary Fund, Washington DC, 9 November 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for the opportunity to participate in today's panel discussion. My assigned topic is U.S. monetary policy in the current global inflation episode. I will briefly address the U.S. outlook and then turn to three broader questions raised by the historic events of the pandemic era.

U.S. inflation has come down over the past year but remains well above our 2 percent target. My colleagues and I are gratified by this progress but expect that the process of getting inflation sustainably down to 2 percent has a long way to go. The labor market remains tight, although improvements in labor supply and a gradual easing in demand continue to move it into better balance. Gross domestic product growth in the third quarter was quite strong, but, like most forecasters, we expect growth to moderate in coming quarters. Of course, that remains to be seen, and we are attentive to the risk that stronger growth could undermine further progress in restoring balance to the labor market and in bringing inflation down, which could warrant a response from monetary policy. The Federal Open Market Committee (FOMC) is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance. We know that ongoing progress toward our 2 percent goal is not assured: Inflation has given us a few head fakes. If it becomes appropriate to tighten policy further, we will not hesitate to do so. We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening. We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks, determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time. We will keep at it until the job is done.

With that, I will turn to three questions that have arisen from the receding but still elevated inflation we are experiencing today. The first question is, with the benefit of 2-1/2 years to look back, what we can say about the initial causes and ongoing policy implications of the current inflation.