For example, after the market turbulence at the start of the year, we kept monetary policy on hold at the March FOMC meeting and explicitly referenced “readings on financial and international developments” in the FOMC statement. Similarly, in speeches prior to the Brexit vote and in the FOMC minutes, we raised our concerns about the risks of disorderly outcomes associated with the U.K. referendum. For instance, the June FOMC minutes state: “Most participants noted that the upcoming British referendum on membership in the European Union could generate financial market turbulence that could adversely affect domestic economic performance.” In addition we are doing a reasonably good job incorporating the flow of new information into our forecasts. The fact that the federal funds rate projections from the SEP have changed significantly from quarter to quarter indicates that FOMC participants are responsive to new information. Now, some have expressed an alternative view that the movement in these rate projections is an indication that the FOMC’s reaction function is unstable and unmoored. I do not see it that way at all. The forecasts of FOMC participants with respect to growth and inflation have not changed much this year. What have changed are expectations about the monetary policy stance that would be appropriate in order to achieve those outcomes. It is important to emphasize that these interest rate projections are not commitments. They are point-in-time views of the appropriate interest rate path and are updated as economic circumstances and financial market conditions change and evolve.
William C Dudley: The US economic outlook and the implications for monetary policy Speech by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Bank Indonesia – Federal Reserve Bank of New York Joint International Seminar, Bali, 31 July 2016. *  *  *  It is a pleasure to have the opportunity to speak here in Bali. Today I plan to provide a brief summary of the U.S. economic outlook, incorporating recent U.S. economic data and global and financial market developments. I will then discuss the implications of the outlook for U.S. monetary policy, and explain how international and financial market developments influence my thinking. I will emphasize two key points. First, financial market conditions matter in determining the appropriate stance of monetary policy. Financial conditions affect households’ and firms’ decisions, so that the transmission of U.S. monetary policy to the real economy depends, to a large extent, on how changes in monetary policy help deliver the appropriate financial market conditions to support our objectives of price stability and maximum employment. But financial conditions also evolve in response to domestic and international events. Thus, when I reiterate that U.S. monetary policy is data dependent, that includes not just the information gleaned from important economic releases such as payroll employment and retail sales, but also how financial market conditions react to economic and financial market developments in the global economy.