Fed Vice Chair Richard Clarida explained that if monetary policy “seeks only to return inflation to 2 percent”, the policy will tend to generate inflation that averages less than 2%. That would in turn “tend to put persistent downward pressure on inflation expectations”.

To “achieve symmetric outcomes for inflation requires an asymmetric monetary policy reactions reaction function in a low r* world with binding ELB constraints in economic downturns,” he added. Hence, FOMC will no longer refers to 2% inflation goal as “symmetric”, but “averages 2% over time”.

He also said said forward guidance and large-scale asset purchases “have been and continue to be effective” with federal funds rate at effective lower bound. He reiterated that “we do not see negative rates as an attractive policy option”. Yield caps and targets were “not warranted” in the current environment.

Full speech here.

Philadelphia Fed President Patrick Harker “inflation is running far too high, and I am acutely concerned about this… “The bottom line is that generous fiscal policies, supply chain disruptions, and accommodative monetary policy have pushed inflation far higher…. I’m also worried that inflation expectations could become unmoored.”

He said he expects “a series of deliberate, methodical hikes as the year continues and the data evolve.”

At a Fed conference overnight, Dallas Fed President Lorie Logan said that inflation appears to be “trending toward 3%”, a figure still above the 2% target.

Despite a cooling labor market, Logan highlighted that it remains “too tight,” implying that the job market’s strength could continue to put upward pressure on wages and, consequently, inflation.

Logan emphasized the need “see tight financial conditions in order to bring inflation to 2% in a timely and sustainable way”. She will be looking at “data” and “financial conditions” as the next meeting in December approaches.

With a particular focus on recent retracement in 10-year Treasury yield and broader financial conditions, Logan suggests these elements will play a pivotal role in shaping Fed’s forthcoming monetary policy decisions.

Atlanta Fed President Raphael Bostic said yesterday, “we are going to get our policy rate certainly to a neutral space where we are no longer providing accommodation. If inflation stays at high levels or levels that are too high — by too high, it’s really not moving back towards our 2% target — then I am going to be supporting moving more.”

“We moved our policy rate 25 basis points and the 30 year (mortgage) moved 2 percentage points. That is tremendous responsiveness,” Bostic also noted. “The moves that we have seen in rates and in yields are a sign that the markets still believe the Fed has credibility. They have said what we are going to do and they have priced in us doing them … That is an important dimension in the marketplace.”