Unconventional: A Policymaker's Reflections on Crisis Recovery
Ten years ago, I was honored to accept the position of president and CEO of the Federal Reserve Bank of St. Louis. With this appointment, I was following a line of distinguished policymakers who carried on the strong, independent and academic research tradition of this Reserve Bank, which I've been a part of since 1990.
One of the interesting aspects of my job is that I started it on April 1, 2008—in the throes of the financial crisis. The mortgage crisis was already brewing, and banks were failing. The Fed was cutting the federal funds rate target and debating further stimulus measures. As you'll read in this report, this wasn't the time for lighthearted jokes or jovial congratulations.
To that end, I’ve spent time with fellow economists and other staff reflecting on how my presidency has coincided with—and has been somewhat defined by—the financial crisis, the Great Recession and ensuing recovery. Out of these discussions, an interesting “look back” began to take shape, fueling this year’s annual report theme, Unconventional: A Policymaker’s Reflections on Crisis to Recovery.
These past 10 years have been anything but ordinary, defined more by their lack of convention than by what any model would have predicted precrisis. We’ve now lived through the Great Recession, through an era of near-zero interest rates, through fears that the U.S. would fall into a deflationary trap as Japan did (but we didn’t) and through the implementation of unprecedented policies aimed at stopping an ever-deepening crisis.
While many of these events are in the rearview mirror, we still face challenging policy decisions. At this 10-year juncture, it seems appropriate to pause and reflect on the lessons learned. As observed by the late philosopher George Santayana, “Those who cannot remember the past are condemned to repeat it.” So, now is a good time to study and learn from prior economic challenges faced in American history, including events like the Great Depression in the 1930s, the Great Inflation period in the 1970s and the Great Recession of this century.
At the same time, as any monetary policymaker and participant on the Federal Open Market Committee (FOMC) would be, I'm focused on where we're going in the years ahead, where the economic recovery is rooting, where the debate on monetary policy will lead us and what the right policy decisions will be in a new era.
If the last decade was focused on unconventional monetary policy, the focus today is on "getting back to normal"—that is, increasing the Fed's policy rate in line with better economic conditions and reducing the size of the Fed's balance sheet, which had grown under the quantitative easing (QE) programs. Given the uncertainty about what "normal" is, it is not surprising that each of us on the FOMC brings his or her own views to the table on what the appropriate policy rate path might be or how normalization should continue to unfold. Sometimes we differ, but that diversity of thought and discourse ultimately yields the best outcome.
Some may think this era will not be as interesting as the previous 10 years, but I'm fascinated by what’s to come. We may not know with certainty what the future will hold, but being at the forefront of the ongoing, rigorous debate of optimal monetary policy is critical. We shouldn't shy away from discussing new approaches to control inflation, debunking old myths about how the economy works or discarding out-of-date macroeconomic theories in favor of new narratives with better explanatory power of the regimes in which we find ourselves.
It's an exciting time to be studying this dynamic global economy of the 21st century, the factors affecting it and what lies ahead. I'm privileged to serve with my colleagues on the FOMC and help provide the best possible monetary policy to assist the performance of the U.S. macroeconomy. It’s also an exciting time to be part of the U.S. central bank, which includes the Board of Governors in Washington, D.C., and 12 Reserve banks spread geographically throughout the country.
Moreover, as president and CEO of the St. Louis Fed, I have the honor of being one of the voices of Main Street, ensuring economic concerns at the local and regional levels are represented at the FOMC table in Washington.
I’m looking forward to serving in the years ahead. It’s going to be a fascinating journey.
President and CEO
Federal Reserve Bank of St. Louis
For more of President Bullard’s public remarks and his research, see From the President.