San Francisco Fed

Robin Harding

John Williams, the new president of the San Francisco Fed, has delivered his first speech. It wasn’t a thriller but I guess his term will be long enough that he need not hurry to excite the markets.

Mr Williams stuck to mainstream Fed thinking but he did set down a few markers. He forecast that growth will bounce back to above 3 per cent for Q2, that total growth for 2011 will be about 3.25 per cent, and that unemployment will end the year at 8.5 per cent. He also sets out his preferred inflation objective of 2 per cent – putting him with the large majority of the FOMC. 

Robin Harding

After a five month recruitment process, the San Francisco Fed has appointed a president from within, its research director John Williams.

The appointment of another highly-respected economist (#329 on the RePEc list) as a regional Fed president is the latest in a trend after Narayana Kocherlakota (#262) in Minneapolis, James Bullard (#738) in St Louis, Charles Evans (#205) in Chicago and Eric Rosengren (#663) in Boston.*

It reflects the evolution of the regional Feds: as the banking industry consolidates and payments systems centralise they are becoming less banks and more economic research centres. The role of the regional Fed president, increasingly, is defined by the ability to hold your own and contribute to debate on the FOMC. 

Robin Harding

As the San Francisco Fed is still operating without a president – something that is becoming increasingly hard to explain given that Janet Yellen was first nominated to the Board last April and left San Francisco at the start of October 2010 – its monthly FedViews publication is filling a strange role as a sort of semi-official comment from the institution.

This month it is written by associate research director Glenn Rudebusch, and combines an optimistic growth outlook of 4 per cent in 2011 and 4.5 per cent in 2012, with a subdued inflation outlook that has core and headline converging at around 1 per cent by the end of 2012. 

James Politi

Even though many economists have pushed back their expectations of the first interest rate hike by the Federal Reserve, the debate rages on about the tools the central bank should eventually use to tighten monetary policy.

In a research paper out today, Glenn Rudebusch, senior vice-president at the San Francisco Fed, makes a compelling case for not rushing to shrink the Fed’s $2,300bn-plus balance sheet, a move that some more hawkish officials have been pushing for early in the tightening cycle in order to contain inflation.

Overall, Mr Rudebusch concludes that since many predict the US economy will take “years” to return to full employment and inflation will stay low, it will take “a significant amount of time” for the Fed to exit from its current easy money monetary policy stance.

But some of his most interesting points 

James Politi

Staff at the Federal Reserve Bank of San Francisco, home to Janet Yellen, the freshly-nominated Fed vice-chair, have just offered some fresh insight into their thinking on the shape of the US recovery.

In a 4-page letter published today, researchers Justin Weidner and John Williams took a close look at the pace of economic rebounds from previous recessions, starting in the post-second world war period, and conclude that this time around, US growth will reach nearly 4 per cent this year, and about 3.5 per cent next year. 

James Politi

Overly-generous unemployment benefits are not by any stretch a major factor behind the surge in long-term US joblessness. Or at least this is what economists at the Federal Reserve Bank of San Francisco argue in a research report released on Monday.

In examining the topic, Rob Valletta and Katherine Kuang of the SF Fed are wading into an area that is of great concern to policymakers and also been a source of tension between Democrats and Republicans on Capitol Hill.