Quarles backs gradual, steady movement on monetary policy

The Fed’s top supervision official on Thursday said economic conditions are as close to meeting the Fed’s dual mandate for employment and price stability as it’s ever been, and he said the best path forward is a “clear, steady strategy and a gradual, predictable approach” toward removal of accommodative measures.

Fed Vice Chairman for Supervision Randal Quarles advocated a gradual, steady pace of monetary policy accommodation in his speech Oct. 18 in New York.

Speaking at the Economic Club of New York Luncheon, in New York City, Quarles said uncertainty around many of the macroeconomic inputs to monetary policy decisions indicates the best course is a stable, gradual, predictable one that is communicated clearly and followed “through the temporarily shifting and sometimes conflicting signs from the economy” – unless a strong, steady signal requires “a firm but moderate correction.”

“Given that the economy has performed fundamentally as I expected at the outset of this year, the right strategy is to maintain the gradual course that I have thought appropriate for some time now,” he said. “Put another way, while I think that there is enough reason to think that the productive capacity of our economy might be increasing so that we should not feel compelled to accelerate our pace, I also think there is enough doubt about current inflation as an infallibly reliable measure of current resource constraints that the continued gradual removal of accommodation is appropriate.”

Fed Vice Chairman Quarles speech before Economic Club of New York