Another rate increase may be appropriate fairly soon. Several factors suggest that the pace of rate increases should be gradual. Including the assem tri of risks at the zero lower bound, Downside Risks from weak Global Demand and gee political events. A lower long run mutual funds rate and the apparently elevated sensitivity of conditions tomile. Uncertainly about the location of supply side constraints provides another reason for gradualism. There are potential concerns with this gradual approach, however. Its possible that Monetary Policy could push reoutly sayings too high and inflation could move to temporarily above target. In an era of anchor expectations undershooting uh employment should result in only a small and temporary increase in the inflation rate. But running the economy above its potential growth rate for a extended period could involve extended risks even if inflation does not mean meaningfully above target. A long period of low Interest Rates could lead to aggressive
Geopolitical events, and i wanted to hear a bit more about the impact of politics here in the United States. This is an election year. What effect, what impact that will have on the economy . Because there was quite a lot of economics in the presentation. I understood most of it but, i mean, part of it not most of it. Im not an economist. But i wanted to understand the impact of the politics on the economy. So im now in my fifth year. Im one day, frankly, into my fifth day at the fed. So this will be my third election cycle and i can say that politics plays absolutely no role whatsoever in our deliberations or in our decision. So we you know, the focus inside the fed is very much not partisan politics or elections. Its very much economic fundamentals, so it can be very jarring to emerge from the fed and talk to people who think of politics think of economics in political terms, which i referred to earlier. Honestly, it has no effect. You know, we announced a quantitative use program in
Consultations. One of the things we quickly mentioned, theres problems looking at measures of real Interest Rates to try to figure out whats going on in the long run. We have the same concept of ken. Whats the and rate going to be in five to seven years. There are persistent deviations from potential output during these periods. You see these periods of very low Interest Rates. It reflects cyclical or medium term inflationary dynamics and not really longer term view on real Interest Rates. What we did is we thought we need to think about this. We need to look at output, Interest Rates, and you have to think about this as a system of equations. That way you can control for the things that ken talked about. Inflation is moving up and down. Youre deep in the suit in terms of being in recessions and things. And real try to filter out. Separate out cyclical development from longer term developments. The key finding we have had, by the way, we update every quarter and post them on the feds w
Removing or reducing double taxation will lead to more jobs andhigher living standards, will make America more competitive in theglobal economy, and will simplify the tax code.
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