![]() ![]() The watch represents the economy, and its gears are different sectors. To show how this is helping to reduce inflation, I’ve been using an analogy of a mechanism, such as a watch, that is powered by gears. Our most important policy tool is the setting of the target range for the federal funds rate, which influences demand for goods and services by affecting borrowing costs. That is why it’s so important for the FOMC to use its monetary policy tools to bring inflation down. Without price stability, we cannot achieve maximum employment on a sustained basis. While it has since moderated to 5 percent, it is still well above our longer-run goal. Inflation reached a 40-year high of 7 percent this past June. 1 Our commitment to 2 percent inflation is an important bedrock principle, providing a “North Star” for policy decisions and helping to improve the public’s understanding of our goals and actions. The FOMC defines price stability as 2 percent inflation, as measured by the personal consumption expenditures (PCE) price index. I should also note that Connecticut’s unemployment rate has fallen to a low level of 4 percent. ![]() Job growth has been strong, job vacancies are plentiful, and at 3.6 percent, the national unemployment rate is near half-century lows. labor market has been extremely resilient. ![]() We are mandated by Congress to promote maximum employment and price stability. The FOMC is responsible for setting monetary policy. The magnitude and duration of these effects, however, is still uncertain. More recently, stresses in parts of the banking system are likely to result in a tightening of credit conditions that will in turn reduce spending by businesses and households. Then Russia’s war on Ukraine fueled higher global energy and food prices. First came the pandemic, which caused huge and prolonged imbalances between demand and supply that are still with us today. Over the past three years, our economy has endured a remarkable series of events that have added to economic uncertainty. I’ll also give my views on the economic outlook and monetary policy.īefore I go any further, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee-what we call the “FOMC”-or others in the Federal Reserve System. Today, I’m going to talk about inflation, which remains a top concern. Persistently high inflation also undermines the ability of our economy to reach its full potential. High inflation hurts everyone, but it’s hardest on those who can least afford to pay more for groceries, rent, and gas. Virgin Islands.Īn important, and enjoyable, aspect of my job is to meet with members of the community-students, educators, and business and civic leaders-from throughout the Second District, so I can hear firsthand about their experiences on issues like the economy, housing, and, of course, inflation. Fairfield County in Connecticut is part of the Federal Reserve’s Second District, which also encompasses New York State, Northern New Jersey, Puerto Rico, and the U.S. It’s great to be here at Housatonic Community College today. ![]()
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