Speech

2023 Economic Outlook

Abstract: We still have work to do. Inflation is too high, and we will need to stay on the case until it is sustainably back to our 2 percent target. We have forecasted additional rate increases this year. That said, we have slowed the pace of those increases. Now, with forward-looking real rates positive across the curve, it makes sense to steer more deliberately as we work to bring inflation down. The experience of the ’70s showed that if you back off on inflation too soon, it comes back stronger, requiring the Fed to do even more, with even more damage. If you change the target before it is achieved, as some have recently advocated, you put the Fed’s credibility at risk, which in turn increases the sacrifice required in order to control inflation. And if you think supply chain improvements and our actions to date are enough to bring inflation down quickly, then our more gradual rate path should limit the harm.

Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Speech

Publication Date: 2023-01-12