Randal K Quarles: The economic outlook, monetary policy and the demand for reserves

Speech by Mr Randal K Quarles, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, at the Money Marketeers of New York University, New York City, 6 February 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I would like to thank the organizers for the opportunity to speak to you today. My plan is to address some topical and important issues, some of which are quite technical but technicalities that I think can have significant consequences.  After providing my thoughts on where the economy and monetary policy are now, I will turn to what we can expect from monetary policy in the years to come.

Changes in the economic environment since the financial crisis, including an apparent decline in the equilibrium interest rate, have complicated the conduct of monetary policy as we work to achieve our dual mandate of maximum employment and stable prices. The Federal Open Market Committee (FOMC) is currently undertaking a review of its monetary policy strategy, tools, and communication practices to make sure we are best positioned to confront the challenges ahead. Since the Committee is still actively discussing the review, I have no intention of front-running the results. Instead, I would like to address a separate but not unrelated topic, the interaction of bank supervision and regulation with monetary policy, and how supervision and regulation might work to make monetary policy implementation more effective in the current environment, particularly as it relates to a bank's demand for reserves.