As a policymaker, when things are moving this fast, what do you do?
Interviewer
Federal Reserve Official
We shouldn't make policy based on short-term headlines; need to wait for information and look 12-18 months out due to monetary policy lags.
Do you think anchoring inflation expectations is worthwhile?
Interviewer
Federal Reserve Official
Traditional Fed wisdom is to look through oil shocks unless: 1) inflation expectations beyond first year move higher (not happening), or 2) wage-price spiral emerges (little evidence, wage pressures declining).
How lonely were you voting for rate cut? How robust was conversation?
Interviewer
Federal Reserve Official
Many colleagues hesitant to draw conclusions from oil news; need to look 12-18 months out, not yesterday's price.
Oil futures curve has changed - December from 60s to threatening 90s. That's a real step up.
Interviewer
Federal Reserve Official
Yes, boosted inflation projection to 2.7% reflecting that, but too early to conclude it's bleeding beyond headline inflation in policy-relevant way.
Colleague said we could need to raise rates. How high is bar? What circumstances would you need?
Interviewer
Federal Reserve Official
Would need to see oil shock bleed into inflation expectations beyond first year causing second-round effects, or wage spiral.
Physical market installations may take years to rebuild. At what point does that de-anchor inflation expectations?
Interviewer
Federal Reserve Official
Would need to see oil price shocks reverberate broadly through supply chains into core inflation persistently, causing second-round effects.
Many agree not environment to hike. But is it right time to cut rates this quickly?
Interviewer
Federal Reserve Official
Yes, traditionally look through oil shock, so policy outlook unchanged: gradual rate cuts.
Balance of risks should change off back of energy shock.
Interviewer
Federal Reserve Official
Balance changed but equally on both sides: inflation risks more concerning, but unemployment risks also more concerning as oil shock is also negative demand shock.