An Update on the Economy and Monetary Policy

I believe a somewhat tighter policy stance will help achieve a better balance between the risks of tightening too much against the risks of tightening too little. Tightening too much would slow the economy more than necessary and entail higher costs than needed to get inflation back to our goal. Tightening too little would allow high inflation to persist, with short- and long-run consequences, and necessitate a much more costly journey back to price stability. A slightly higher policy rate would roughly equate the probabilities that the next policy move will be a tightening move versus a loosening move. This would be a good holding point as we accumulate more information about whether the economy is evolving as expected. If it is not, then we can adjust our policy rate either up or down, as appropriate. Of course, while this is my current assessment, there continues to be uncertainty about the outlook, and the economy could evolve differently than anticipated. My policy views will be informed by all of the incoming economic and financial information, not only official government statistics but also regional information gathered from our business, labor market, and community contacts; a variety of surveys on economic and banking conditions; and higher-frequency data such as credit card spending. All of this information can help determine not only where the economy is but also where it is going, and therefore, inform our policy decisions.