We at the Fed need to very closely monitor the data to make sure that inflation remains contained. And we will. But as I believe I will demonstrate this morning, the most likely result is that these supply shocks cause slower growth in the near term while having only a modest effect on longer-term inflation rates – which has been the U.S. experience since 1986. Unemployment remains quite elevated, at 8.8 percent, and I anticipate a slower return to full employment than we would have experienced absent these supply shocks. With the core inflation rate over the prior year at a little above 1 percent, I anticipate only a gradual return of core and total inflation rates to something like our consensus “stable” rate of about 2 percent, over the medium term. If the economic data continue to support this outlook then the current, accommodative stance of monetary policy is appropriate, and can remain in place and continue to support economic growth – so that we continue to make progress toward our goals of returning to full employment and a sustainable long-run inflation rate – the two elements of the Federal Reserve’s dual mandate from Congress. 1  My colleague Geoffrey Tootell, Director of Research at the Boston Fed, has prepared an illuminating public policy brief that investigates whether commodity price spikes cause long-term inflation.
Thomas Jordan: Financial crisis dispersing? Economy changing direction? Speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the general assembly of the Handels- und Industrieverein des Kantons Schwyz, Schwyz, 25 August 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The situation on the international financial markets has recently brightened again. This is mainly due to the positive keynote in company earnings reports and a series of unexpectedly favourable economic data. The relaxation of monetary policy was pursued further through the implementation of unconventional measures in March 2009, and this is also likely to have had a calming effect. Price advances since March should, however, be partly seen as corrections to excessive downward movements in the previous period. Considerable uncertainties still prevail and the danger of setbacks should not be carelessly underestimated. The recessionary developments in the world economy weakened significantly in the second quarter of 2009. Expansionary monetary policy around the world, together with fiscal support programmes, have probably played an important role in this respect. Economic indicators are also showing a turn for the better in the Swiss economy. Nevertheless, in view of the exceedingly low level of utilisation of production capacity, industrial investment will probably continue falling. Given the increasingly gloomy outlook for employment, private consumption is also likely to put a damper on the resumption of cyclical activity.