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Question From MNI On Recent Loosening Financial Conditions

FED
  • Q (from MNI's Evan Ryser): What does recently loosening financial conditions mean for the Fed and its inflation fight?
    • A: So we monitor financial conditions. Broad financial conditions. You are right, it's this dollar and equities. We are going to use our policy tools working through financial conditions to get inflation under control. The implication is we will do what it takes to get inflation down. And in principle that could mean that if financial conditions get looser we have to do more. But what tends to happen though is financial conditions get in and out of alignment with with what we're doing, and ultimately, over time, we get where we need to go.
  • Q: Do you expect to cut rates next year while continuing QT?
    • That could happen. is that consistent if you think about them both as normalization. Imagine it's a world where things are okay and it's time to bring rates down from what are restrictive levels to more normal levels. Normalization in the case of the balance sheet would be to reduce QT. Or to continue it. Depending on where you are in the cycle.
    • There are two independent things. The active tool of monetary policy is rates. But you can imagine circumstances in which it would be appropriate to have them working in what might be seen to be different ways - but that wouldn't be the case.
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