New York Fed President John Williams said the economy is on a “pretty good trajectory”. And, “it’s really a matter of if there’s more or less fiscal policy that maybe tilts that trajectory”. He expects the economy to be back close to full employment in “about three years time”, but “there’s clearly a lot of unknowns”.

On Fed’s average inflation targeting, “we’re purposely overshooting that moderately for some time to get that balance,” he said. “To me, success is not some arithmetic or some formula but it’s really this notion of inflation expectations, how people think about what’s inflation going to be in the future.”

Dallas Fed President Robert Kaplan said in an essay that 2020 GDP is expected to show a contraction of approximately -3.0%. The economy would then growth by roughly 3.5% in 2021. But he emphasized the need of “additional” fiscal measures. ” Lack of additional fiscal relief would create a key downside risk to my economic forecast for 2020 and 2021.”

On recent FOMC statement, Kaplan explained his dissent again: “There is an important difference between remaining “accommodative” and keeping rates at zero. I believe, after we have fully weathered this crisis, we should be willing to be more accommodative than in the past in order to create a stronger and more inclusive labor market and make progress on achieving our 2 percent average inflation target. However, I am cognizant that as the economy approaches full employment and we are on track to reach our price stability objectives, the equilibrium nominal rate of interest (the federal funds rate at which monetary policy is neither restrictive nor accommodative—often referred to as R*) is likely to increase. This means that as we approach achievement of our dual-mandate objectives, the stance of monetary policy will actually become more accommodative if the fed funds rate were to remain at zero. I can understand why future Committees will want to remain accommodative at that point in order to ensure we achieve our goals, but will they want to be effectively increasing the level of accommodation by keeping the federal funds rate at zero? I would like future Committees to have the flexibility to make this judgment.”

Full essay here.

Philadelphia Fed President Patrick Harker said in a speech that following Q2’s historic contraction, the economy has “rebounded faster than many of us had projected. The recovery is expected to continue, but “not fast enough” to have GDP reaching pre pandemic level by the end of the year. “Employment, unfortunately, probably won’t be back to pre-pandemic levels until 2023.”

On Fed’s new statement, Harker said “tolerating the risk of slightly higher inflation, in our view, is worth it if it helps us achieve our employment goals.”

Full speech here.

Cleveland Fed President Loretta Mester said yesterday that economic data showed the the economy is recovery but it’s still a “fragile recovery”. Fed is still “far from both of our goals” for both employment and inflation. She expects unemployment to end the year between 7% and 8%. Inflation could be above 1% but well below the 2% target.

Outlook depends on the course of the coronavirus pandemic. “If things turn out that the virus remains under control and there is a vaccine that is able to be distributed, in the middle of the year, say, then we’ll see the recovery continuing and maybe broadening out a bit,” she said.

Mester also urged actions to promote an inclusive economy, “one in which people have the chance to move themselves and their families out of poverty, one in which systemic racism does not limit opportunities and one in which all people can fully participate — the U.S. economy will not be able to live up to its full potential and the country will suffer.”