Comments from the Fed Chair on Day 2 of Humphrey Hawkins
- It will take a number of years to figure out labor force participation
- Many people retired during the pandemic
- Would be prepared to deploy counter-cyclical capital buffer if needed
- Financial institutions are well capitalized
- Difference between Treasury and MBS purchases is not a large one
I believe US labor force participation has more room to run than the Fed believes, and here is why.
- Inflation is not tied to usual factors like a tight labor market or tight economy
- This is a shock to the system associated with reopening
- The challenge the Fed is confronting is how to react to this inflation which is larger than expected
- This particularly type of inflation is unique in history
- Fed will continue to evaluate the risks that affect inflation
- A handful of things account for 'essentially all of the overshoot' in inflation
