Fed Vice Chair Urges Bold Step: Federal Reserve Vice Chair Philip Jefferson has hinted at the necessity for robust measures to address ongoing inflation uncertainties. In a speech in Zurich, he emphasized the heightened economic uncertainty stemming from the COVID-19 pandemic and the lingering unpredictability of inflation.
Jefferson underscored the importance of factoring in uncertainty when devising monetary policy. He referenced contrasting approaches within economic literature, with one advocating for a gradualist stance and the other calling for more assertive monetary measures. The key focus, according to Jefferson, is on inflation persistence, where both approaches lean towards stronger policies to prevent the potential embedding of inflationary forces in expectations.
The Federal Reserve has already taken substantial steps to combat high inflation, with a 5.25 percentage point increase in the policy rate over 18 months, reaching the current range of 5.25%-5.50% since July. While inflation has moderated from its 40-year highs in the summer of 2022, it hovers around 3.4% by the Fed’s preferred metric.
In a recent New York Fed survey, inflation expectations showed signs of softening in October. Fed Chair Jerome Powell has maintained openness to further tightening measures if progress toward the Fed’s 2% inflation goal falters. The challenge remains navigating uncertainty and determining the most effective policy in the face of ongoing economic complexities.
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Our Reader’s Queries
What is the vice chair of supervision?
Michael Barr was sworn in as the current vice chair for supervision on July 19, 2022.
Is the money that banks must have on hand at all times?
Bank reserves refer to the minimum amount of cash that financial institutions are required to maintain in order to comply with central bank regulations. These reserves are typically held in a secure vault on the bank’s premises or in an account with the central bank. Essentially, bank reserves are physical currency that must be readily available to ensure the stability of the financial system.
What are the responsibilities of the Fed?
As the central bank of the United States, the Federal Reserve plays a crucial role in supporting the economy. Its three main functions include ensuring a smooth and dependable payment system, overseeing and regulating bank operations, and setting monetary policies. By fulfilling these responsibilities, the Fed helps to maintain stability and promote growth in the economy.
What did Federal Reserve Act do?
The 1913 Federal Reserve Act is a crucial piece of legislation in the United States that brought about the creation of the Federal Reserve System. Its main objective was to promote economic stability in the country by introducing a central bank that would oversee monetary policy. This act was passed by Congress with the aim of ensuring that the U.S. economy remained strong and resilient in the face of economic challenges. Thanks to the Federal Reserve Act, the U.S. has been able to maintain a stable financial system that has helped to drive economic growth and prosperity.