An Update on the U.S. Economy and Monetary Policy

In contrast to where we are now, our policy was not well positioned when we started our tightening cycle because the policy rate was so low and inflation was moving up persistently. We needed to raise rates fairly aggressively. At this point, we are seeking to calibrate our policy well to economic developments so we can avoid having to act in an aggressive fashion. Indeed, if the economy evolves as I expect, I anticipate that we will be able to move rates down gradually as inflation and inflation expectations move down, allowing us to continue to manage the risks to both sides of our mandate. But let me reiterate: the actual path of policy will depend on how the economy actually evolves. The FOMC’s job continues to be to assess the implications of economic and financial developments for the outlook and risks around the outlook and, given that assessment, to calibrate monetary policy so that inflation returns sustainably to our 2 percent goal and labor markets remain healthy.