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