President Jeffrey M. Lacker - Federal Reserve Bank of Richmond

Thank you very much, Henry. It's a pleasure to return to Charlotte again at the end of the year to discuss the economic outlook.1 I'll begin by discussing current conditions in a bit more detail, before going on to discuss the outlook for the coming year. Before we begin though, let me note that the usual disclaimer applies – the views I express are my own and are not necessarily shared by any of my colleagues on the Federal Open Market Committee.

Thank you very much, Henry. It's a pleasure to return to Charlotte again at the end of the year to discuss the economic outlook.1 I'll begin by discussing current conditions in a bit more detail, before going on to discuss the outlook for the coming year. Before we begin though, let me note that the usual disclaimer applies – the views I express are my own and are not necessarily shared by any of my colleagues on the Federal Open Market Committee.

I am pleased to be with you here today to discuss my views on the economic outlook. 1 When this date was arranged many months ago, I was looking forward to delivering my remarks during the sleepy dog days of summer. Instead, we meet during fairly tumultuous times in financial markets. Over the last several weeks, we have seen substantial revisions in market participants' assessments of the fundamental value of securities related to sub-prime and other non-standard mortgages, financial distress related to mortgage finance at several entities, considerable widening of credit spreads, and significantly larger swings in asset prices. This turbulence makes assessing the economic outlook more challenging than usual, and of course makes central bank policymaking especially challenging.

I am pleased to be with you here today to discuss my views on the economic outlook. 1 When this date was arranged many months ago, I was looking forward to delivering my remarks during the sleepy dog days of summer. Instead, we meet during fairly tumultuous times in financial markets. Over the last several weeks, we have seen substantial revisions in market participants' assessments of the fundamental value of securities related to sub-prime and other non-standard mortgages, financial distress related to mortgage finance at several entities, considerable widening of credit spreads, and significantly larger swings in asset prices. This turbulence makes assessing the economic outlook more challenging than usual, and of course makes central bank policymaking especially challenging.

I am very pleased to be with you today to discuss my views on the economic outlook, with particular emphasis on the outlook for inflation.1 In its most recent statements, the Federal Open Market Committee has identified "the risk that inflation will fail to moderate as expected" as its "predominant policy concern." This places current inflation and the inflation outlook squarely at center stage in thinking about the economy and monetary policy. So in my remarks today, I will take a closer look at inflation's recent behavior and the prospects for its future behavior. In doing so, I'll discuss the interplay between real activity and inflation expectations. As always, these remarks should be taken as my own personal views, and not necessarily those of any of my colleagues in the Federal Reserve.

I am very pleased to be with you today to discuss my views on the economic outlook, with particular emphasis on the outlook for inflation.1 In its most recent statements, the Federal Open Market Committee has identified "the risk that inflation will fail to moderate as expected" as its "predominant policy concern." This places current inflation and the inflation outlook squarely at center stage in thinking about the economy and monetary policy. So in my remarks today, I will take a closer look at inflation's recent behavior and the prospects for its future behavior. In doing so, I'll discuss the interplay between real activity and inflation expectations. As always, these remarks should be taken as my own personal views, and not necessarily those of any of my colleagues in the Federal Reserve.

Let me begin by telling you about some recent experiences. I had the opportunity earlier this year to guest-teach a couple of business school economics classes. I opened my discussions with a pair of questions, asking students to put themselves in the place of a monetary policymaker choosing a target for the federal funds rate. First I gave them a set of hypothetical facts about the state of the economy: a slowdown in housing in the wake of multi-year housing boom; rising mortgage default rates; preliminary indicators of a slowing in business investment. And then I asked them: "What are you going to do?" The students dutifully responded that this situation could call for a reduction in the funds rate. They'd obviously been doing their homework.

Let me begin by telling you about some recent experiences. I had the opportunity earlier this year to guest-teach a couple of business school economics classes. I opened my discussions with a pair of questions, asking students to put themselves in the place of a monetary policymaker choosing a target for the federal funds rate. First I gave them a set of hypothetical facts about the state of the economy: a slowdown in housing in the wake of multi-year housing boom; rising mortgage default rates; preliminary indicators of a slowing in business investment. And then I asked them: "What are you going to do?" The students dutifully responded that this situation could call for a reduction in the funds rate. They'd obviously been doing their homework.

I recently had the opportunity to guest-teach a couple of business school economics classes. It was great to be back in the classroom. Don’t get me wrong – I like my current job. But it was nice not to have to vote on anything.

I recently had the opportunity to guest-teach a couple of business school economics classes. It was great to be back in the classroom. Don’t get me wrong – I like my current job. But it was nice not to have to vote on anything.

It’s a pleasure to be here again this year for what has come to be called the “Broaddus Breakfast.” I am honored to be invited back for a third appearance. Before I begin, I owe you the usual disclaimer that these views are my own and are not necessarily shared by my colleagues around the Federal Reserve System. But for those of you who have followed my voting record, this should come as no surprise.

It’s a pleasure to be here again this year for what has come to be called the “Broaddus Breakfast.” I am honored to be invited back for a third appearance. Before I begin, I owe you the usual disclaimer that these views are my own and are not necessarily shared by my colleagues around the Federal Reserve System. But for those of you who have followed my voting record, this should come as no surprise.

It is a pleasure to be with you today to discuss the economic outlook for the region. I work, as Barbara’s kind introduction noted, at the Federal Reserve Bank of Richmond. The fact that our nation’s capital lies within the Richmond Federal Reserve District, rather than the other way around, is an odd byproduct of decisions made over 90 years ago. When establishing the Federal Reserve System as the nation’s central bank, Congress created a confederation of regional banks, rather than a single, centrally located bank. The founding organizers then made Richmond the headquarters for the Fifth Federal Reserve District, which covers the area from West Virginia and Maryland in the North down to the Carolinas in the South. The founders’ motivating vision was that the nation was better served by an institution that was closely linked to the diverse economies that make up our country. And so, one of our key responsibilities at the Reserve Banks is to understand local economic conditions around our Districts. Of course, the Fed is well represented inside the beltway, since Washington is the home of the Board of Governors of the Federal Reserve System, the entity that oversees Reserve Bank activities. They are kind enough to let me roam Washington at will, and we are kind enough to cut their paychecks for them.

It is a pleasure to be with you today to discuss the economic outlook for the region. I work, as Barbara’s kind introduction noted, at the Federal Reserve Bank of Richmond. The fact that our nation’s capital lies within the Richmond Federal Reserve District, rather than the other way around, is an odd byproduct of decisions made over 90 years ago. When establishing the Federal Reserve System as the nation’s central bank, Congress created a confederation of regional banks, rather than a single, centrally located bank. The founding organizers then made Richmond the headquarters for the Fifth Federal Reserve District, which covers the area from West Virginia and Maryland in the North down to the Carolinas in the South. The founders’ motivating vision was that the nation was better served by an institution that was closely linked to the diverse economies that make up our country. And so, one of our key responsibilities at the Reserve Banks is to understand local economic conditions around our Districts. Of course, the Fed is well represented inside the beltway, since Washington is the home of the Board of Governors of the Federal Reserve System, the entity that oversees Reserve Bank activities. They are kind enough to let me roam Washington at will, and we are kind enough to cut their paychecks for them.

It is a pleasure to speak on the economic outlook this morning, in part due to this distinguished Ohio Valley audience, and in part because the outlook is so encouraging. Growth is proceeding on a solid pace this year, and inflation is low and stable. Moreover, our economy has withstood several substantial shocks over the last several years, and yet has remained on course. So, I think we have abundant reason to be grateful for a quite positive economic outlook. Before I begin reviewing that outlook, however, I would like to note, as usual, that the views expressed are my own and are not necessarily those of my colleagues in the Federal Reserve System.