Philip N Jefferson: Implementation and transmission of monetary policy

Speech by Mr Philip N Jefferson, Member of the Board of Governors of the Federal Reserve System, at the H. Parker Willis Lecture, Washington and Lee University, Lexington, Virginia, 27 March 2023. 

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

Accompanying charts of the speech 

Thank you very much for inviting me to be part of the H. Parker Willis Lecture Series. As you know, Dr. Willis was a distinguished professor here at Washington and Lee University. Among many other accomplishments, he helped create the Federal Reserve System. He served as the first secretary to the Federal Reserve Board from 1914 to 1918 and later as the first research director.

Before I go further, let me remind you that the views I will express today are my own and are not necessarily those of my colleagues in the Federal Reserve System.

Many discussions of monetary policy simply talk about the Federal Reserve setting the federal funds rate to promote our goals of maximum employment and price stability, without giving attention to the specific actions we take to put the federal funds rate where we want it-that is, to the way we implement monetary policy. And even in economics classes that cover this topic, the teaching materials have not always caught up with the fact that we have purposely changed our implementation framework over the past decade. My colleagues at the Fed are working with educators to close the curriculum gap, and I hope this lecture will further help this endeavor.

In honor of Dr. Willis's important contributions to the design and creation of the Federal Reserve, today I would like to talk to you about how the Fed currently uses a specific set of tools to implement monetary policy and how monetary policy is transmitted to the economy. Then, I will offer some concluding remarks.