Michelle W Bowman: Reflections on the economy and monetary policy

Speech by Ms Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, at the Utah Bankers Association and Salt Lake City Chamber Banker and Business Leader Breakfast, Salt Lake City, Utah, 28 November 2023.

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

Central bank speech  | 
13 December 2023

It is a pleasure to join you this morning in Salt Lake City for the Utah Banker and Business Leader Breakfast. I find great value in engaging with and learning from the experiences and perspectives of those who are directly engaged in the economy-businesses and consumers, and those who support economic activity by providing access to financial services through the broader financial system. These experiences help provide context for the economic and financial data that we rely upon for our economic analyses. I look forward to learning about how your businesses-and the clients and communities you serve-are navigating the current economic and financial conditions.

Since joining the Board of Governors of the Federal Reserve System five years ago this week, the U.S. economy has experienced a number of unique economic challenges. In my remarks today, I will include some of my observations on a number of economic developments that our economy has experienced during that time. I will also consider the monetary policy actions taken by the Federal Open Market Committee (FOMC) in response to these developments and conclude by highlighting several uncertainties surrounding the economic outlook and how they affect my views about appropriate monetary policy going forward. Prominent among these uncertainties are whether supply-side improvements will continue to reduce inflationary pressures; the extent to which the demand for goods, services, and labor will come into better balance with supply given the current setting of monetary policy; and the level at which the federal funds rate will be consistent with the FOMC's inflation and maximum-employment goals in the longer run.

The Post–Financial Crisis Economy and Monetary Policy

Five years ago, monetary policymakers faced a much different set of challenges than those we face today. At that time, one of the primary concerns of the FOMC was that inflation had consistently been running slightly below the Committee's 2 percent inflation target, despite years of accommodative monetary policy following the 2007–08 financial crisis and subsequent recession. More broadly, many central banks around the world were grappling with the prospect of structurally lower interest rates due to a variety of factors including demographic changes and higher savings rates, lower potential output and productivity growth, and greater investor demand for safe assets like Treasury securities.