William C Dudley: Transcript of the Cornell College of Business Annual New York City Predictions Event Transcript of a discussion between Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, and Ms Maureen O'Hara, Robert W Purcell Professorship of Management, at the Cornell College of Business Annual New York City Predictions Event, New York City, 15 February 2017. * * * Maureen O’Hara: Bill, let me start off with kind of the low-hanging fruit. The post-Trump economy has been confusing, with low Q4 growth, yet record-setting stock market levels. So let me just throw you an easy one here. What does the Fed see as the outlook for the next year? President Dudley: For the near-term I think more of the same. I mean, we think the economy is going to continue to grow, a little bit above-trend. That’s going to generate job gains that put, you know, more pressure on the labor market, and as a consequence of that, we think inflation’s going to move back towards our 2% objective. So, you know, we could be completely wrong, but that – the data that’s come out over the last couple of months, is very consistent with that pattern. A lot of uncertainty in the outlook. I mean we don’t know what’s going to happen with the whole host of policy choices: healthcare reform, immigration policy, trade policy, tax policy, fiscal policy.
This shift is seen as a form of natural adjustments, when the population in general embraced increasing progress and that a fast changing modern environment requires precious resources to be well spent in a short period of time. Premised against these demographic and societal value changes, many countries worldwide have placed greater effort and emphasis in reviewing the sustainability and long-term affordability of their pension systems, culminating in several reforms to their pension structures. The reforms are in fact inevitable, as most of the existing public pension schemes, whether pay-as-you-go (PAYG) system or a fully funded system, were ill-designed to deliver fair benefit levels to pensioners in the future. This is so as they were originally crafted without taking into account the demographic and socio-economic changes that are being seen today. In reformulating retirement strategies, therefore, due emphasis must be given to several main challenges, foremost being longevity risk posed by an ageing population. A majority of pension schemes are built on the premise that the government is able to support the defined benefit pension payments as and when they become due. In simple terms, this essentially means that I will be financially taken care of by the government when I'm old. However, this notion may not be financially sustainable anymore as most pension schemes have not imputed the impact of longevity risk at the outset. Longevity had resulted in a higher number of retirees drawing pension benefits vis-à-vis the gainfully employed tax-paying persons, thereby contributing to untenable fiscal deficits.