>Our new statement explicitly acknowledges the challenges posed by the proximity of interest rates to the effective lower bound. By reducing our scope to support the economy by cutting interest rates, the lower bound increases downward risks to employment and inflation. To counter these risks, we are prepared to use our full range of tools to support the economy.
What other tools do they have besides setting interest rates? They keep alluding to these tools but do not explicitly say what they are. Should we expect another round of quantitative easing?
> the gains began to be shared more widely across society. The Black and Hispanic unemployment rates reached record lows, and the differentials between these rates and the white unemployment rate narrowed to their lowest levels on record.
I didn't know this, and it runs against the "growing wealth inequality" narrative. Or maybe it's possible that wealth inequality is increasingly driven by factors other than race.
> We began this public review in early 2019 to assess the monetary policy strategy, tools, and communications that would best foster achievement of our congressionally assigned goals of maximum employment and price stability over the years ahead in service to the American people.
As an American who knows nothing about monitor policy or the process by which it is developed, just how much public comment from an average American was considered or even put forward? Could someone comment on that aspect?
The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.
I know this is counterintuitive but in order to spur growth, and encourage the right type of risk taking which is how you end up with innovations, I believe you need to have interest rates above a certain threshold. Indefinite ZIRP discourages risk taking and encourages financial growth arrangements.
> The unemployment rate hovered near 50-year lows for roughly 2 years, well below most estimates of its sustainable level. And the unemployment rate captures only part of the story. Having declined significantly in the five years following the crisis, the labor force participation rate flattened out and began rising even though the aging of the population suggested that it should keep falling.
The entire press release is worth a read, but I want to specifically call out the above quote. I think looking into these two statistics can form the basis for useful discussion.
Unemployment rate being "below estimated sustainable levels" has multiple interpretations, some charitable, some less so. One is that the current economy is better at allocating people to their jobs. This isn't a theory, just a hypothesis. Gig economy work, increases in highly skilled workers (Who traditionally have had lower unemployment than less-educated cohorts ) might be drivers that could reduce the friction of getting a job for contemporary workers.
To add another possible hypothesis, it could be that people are just hedging. If a large enough cohort of people feel unsafe or want to adjust their job risk profile, they might choose to commit to employment prior to a downturn. If people are hedging, we might even see a decrease in real wage as people value the (weak, but albeit better than nothing) insurance they get instead of being valued entirely by their market rate wage.
The labor force participation component, frankly, I'm confused on. The Bureau of Labor statics release clearly shows labor participation has been and is still falling (Covid blip aside, 5 year time window irrespective) . Their footnote calls out the 25-54 year old bracket, which is apparently participating more. I can see why they say that the labor force participation rising is unexpected, I certainly don't see it.
To advance a different thesis, it is entirely possible that as people retire, a less than whole percent of their roles are being filled by people in this younger cohort, who can now more easily participate due to less labor being available for existing companies. This would align more with the BLS and Federal Reserve numbers, as we have, by percentage, more aged individuals (Who are the primary non-participants) in addition to growth in a cohort who we would expect to fill those rolls moving forward.