•  The FOMC’s forward guidance on the future stance of policy has changed. In March, the Committee reaffirmed its view that the current zero to ¼ percent target for the federal funds rate remains appropriate to support continued progress toward maximum employment and price stability. Noting that economic conditions were unlikely to warrant an increase in the target range at the April meeting, it advised that such an increase could be warranted at any later meeting, depending on how the economy evolves. My comments today will focus on the Federal Reserve’s readiness to implement policy firming when directed to do so by the FOMC. In this context, I will discuss the Federal Reserve’s ongoing refinement of its approach to policy normalization, with a focus on initial steps to leave the zero lower bound and some of the considerations that have directed the Committee away from a fixed-rate, full-allotment ON RRP facility. I will then review results of our testing, which inform our confidence in that approach. I will also discuss the Federal Reserve’s flexibility to adapt its operational and analytical tools to the dynamic nature of the markets in which we operate. As always, these views are mine alone and do not necessarily reflect those of the New York Fed or the Federal Reserve System. Ongoing refinements in the Federal Reserve’s approach to policy normalization With the conclusion of the FOMC’s asset purchase program last October and the ongoing reinvestment of principal repayments, the System Open Market Account’s (SOMA) securities portfolio stands at $ trillion.
First, the target the Bank of England is to pursue -- a low inflation target of 2½% -- is set by the government. In an open market economy, the conduct of an effective monetary policy is helped enormously if the authorities can be clear and open about the price stability objective they are pursuing; and in a democratic system, it is absolutely right that the elected government should set this critical strategic objective for the central bank to pursue. 5. Secondly, it is then the responsibility of the Bank of England to achieve this low inflation target, principally through management of interest rates. But this responsibility is to be conducted within a structured framework. Decisions on interest rates are taken by a Monetary Policy Committee in the Bank, consisting of nine members: five of these come from within the Bank -- the Governor, the two Deputy Governors and the two Executive Directors responsible for monetary policy; the other four are appointed by the Chancellor of the Exchequer and are recognised experts in their field -- in fact, four economists of outstanding reputation. A representative of the Treasury attends the meetings and can contribute to the discussion, but has no vote. The Monetary Policy Committee meets monthly. It announces its decision each month as soon as its meeting concludes, and the minutes of its meetings are published within six weeks, including details of how each member voted. 6. A third important feature is that monetary policy is conducted with a high degree of transparency.