Nick Timiraos

speaker

252 appearances 6 recordings 1 series first heard Sep 2017 last heard Nov 2024

Nick Timiraos’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Federal Reserve to Raise Rates in December? It's Complicated · 14 Sep 2018 podcast

Now, that's sort of old news, and the Fed has been raising rates pretty steadily since the end of 2016.

And so at some point, that language is going to be stale.

There's possibly a debate about whether to just take that language out now because is it really serving any purpose?

And beyond that, the big debate that a number of Fed officials are ready to have is,

what should we do with policy once we get rates to a setting that we think is closer to neutral?

There's a lot of uncertainty around where that neutral rate is.

And the Fed chairman, Jay Powell, has expressed concern about giving false precision around where this thing is because we really don't have a great idea as to where neutral is.

So the argument for dropping the accommodative language

in September or even in December would be, look, we know we're not going to be accommodative at some point, but we don't really want to give such a strong signal by taking out that language that we think we're now at neutral because we don't really know where neutral is.

So a reason to drop the language is simply because we know it's getting stale.

It's going to be stale at some point, but we don't want to give a lot of precision about where we think neutral is, and we certainly don't want taking that line out

to tell people something that we don't really mean to say.

That's right.

So at a broad level, there is one camp within the Fed, and this includes some of the staff economists that is laying the groundwork to continue to lift rates

once even beyond a neutral setting.

The concern right now is that the unemployment rate is below where most officials think you would have a sustainable kind of a sustainable inflation rate.

The economy is also growing faster than they think would be sustainable over the long run.

So both of those things suggest at some point price pressures are going to pick up and the Fed really wants to guard against unsustainable inflation.

So you have one camp that is laying the groundwork to raise rates beyond neutral

You have another camp that's saying, wait a minute, if we get to where we think a neutral rate is and inflation's at our 2% target and the economy's doing pretty well but it doesn't look to be overheating, maybe we can just stop there.

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