Thank you, Stacy, for the opportunity to be part of this celebration. It is great to be here to honor the Department of Research and Statistics (R&S) and I am humbled to see so many Federal Reserve employees who have served the institution over their long and distinguished careers return for this great occasion. The Fed is one of those places where you can work for a decade or so and still feel like a newbie.
For those listening outside this room, I will briefly summarize R&S’s responsibilities. Much of the department, along with other divisions of the Board, is involved in producing the Tealbook, which contains staff forecasts for the U.S. economy, as well as a large amount of data and analysis on financial and economic issues, which is delivered to the Federal Open Market Committee (FOMC) before Our meetings.
Outside of the FOMC meeting cycle, R&S deploys its experts where they are needed throughout the Board, providing critical input to work on financial stability, bank merger analysis, and many other topics. Research and development is also an ongoing source of specialized information for policy makers. If board members have questions about even the most arcane aspects of economics, they can email and, in no time, sit down with some of the best-informed experts on the topic. Most often, these are R&D economists. During the pandemic, when questions were raised about how computer chip shortages would affect auto production or how companies would respond to backlogs at U.S. ports, R&S provided detailed briefs on these topics. Among its other activities, the Board of Governors is one of the most productive economic research institutions in the world, and a significant share of this work is carried out within R&S, supporting our mission of promoting a healthy economy and a strong and stable financial system.
I’ve talked about the research, now let me turn to the statistics. In addition to collecting data from many sources outside the Federal Reserve, the R&S is itself a source of some of the most important data about the economy and financial system. Our consumer credit data provides financial markets and the public with a vital indicator of the strength of household spending and balance sheets. Each month, the Industrial Production Report gives us insight into how well certain sectors of the economy are doing, especially in manufacturing. The R&S is also responsible for the financial accounts of the United States, which is a quarterly summary of the assets, liabilities, and transactions of different sectors of the economy. Every three years, the R&S conducts the Survey of Consumer Finances, a leading source of detail and insights into how households are faring in the economy. The most recent survey was published just last month. This and other data series produced by R&S are an important public service.
I want to focus in more detail on forecasts, which are perhaps the most important roles of R&S. R&S’s fundamental forecasts for the U.S. economy, along with simulations of six plausible alternative paths, form the bulk of the foundational foundation that enables us to pursue the goals of our dual mandate.
Some people are attracted to very difficult tasks. The people at R&S are those people, who have chosen such a task of forecasting the course of the US economy, eight times a year for the Federal Open Market Committee meetings, with constant updates between meetings. They do this on the biggest stage and with the highest risks, knowing that economics often surprises us.
Many qualities are required to do this job well.
I’ll start with extreme commitment. Business requires everything you have to give. You have to love this job to do it well.
The job also requires integrity, as policymakers rely on R&D to bring us their best ideas, not shade the results for any reason.
Systematic forecasting also requires a systematic approach and a high degree of intellectual rigor. Ask Stacy and her colleagues to explain a particular aspect of expectations, and you’ll find that they have a clear explanation grounded in a rigorous framework.
This intellectual rigor must be coupled with flexibility and agility. Economic models can do a reasonably good job of capturing the workings of the economy over the past decades. Of course, even with the latest models and even in relatively calm times, the economy often surprises us. But our economy is resilient and dynamic, and is sometimes subject to unpredictable shocks, such as the global financial crisis or the pandemic. At those times, forecasters have to think outside the models.
This work also requires large doses of courage and humility. And finally, the ruling. To complete this rigorous process, there must be good judgment, based on knowledge and experience.
Perhaps the most important legacy of the Department of Research and Statistics in the last century is the flexibility, creativity, energy, rigor and commitment with which the Department of Research and Statistics rose to the many challenges that it and our country faced in that period. from history. On behalf of the Board and the FOMC, I thank you for that, and I heartily congratulate you on your first 100 years of serving the public.
“Beer aficionado. Gamer. Alcohol fanatic. Evil food trailblazer. Avid bacon maven.”