IFFCBANO Symposium: Keeping Trade Moving

Adrienne C. Slack Regional Executive Bank of Atlanta - New Orleans Branch

The views expressed here are my own, and not necessarily those of the Atlanta Fed or the Federal Reserve System. The Fed’s Dual Mandate

• The Fed is pursuing two objectives as given to us by Congress— maximum employment and price stability.

• The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the job market, although a stronger economy does help with job creation.

• The Federal Open Market Committee (FOMC) has chosen an inflation target of two percent per year over the medium term as measured by the annual change in the price index for personal consumption expenditures.

2 Board of Governors of the Federal Reserve System

Randal Quarles Jerome H. Powell Richard H. Clarida Vice Chair for Chair Vice Chair Supervision

Vacant Michelle W. Bowman Vacant

3 The Presidents

Loretta Mester Charles Evans Patrick Harker Eric Rosengren Cleveland Chicago Minneapolis Philadelphia Boston 4th District 7th District 9th District 3rd District 1st District

John Williams New York 2nd District

Tom Barkin Richmond 5th District Mary Daly Robert Kaplan James Bullard 12th District Kansas City Atlanta 10th District Dallas St. Louis 6th District 11th District 8th District 4 The Sixth District Information Flow

Public

Sixth Policy District Business

Sixth FOMC District Research

Sixth Atlanta District Board of President Directors

6 Summary of the Economic Environment: The May 2019 FOMC Policy Statement

• Information received since the Federal Open Market Committee met in March indicates that the labor market remains strong and that economic activity rose at a solid rate.

• Job gains have been solid, on average, in recent months, and the unemployment rate has remained low.

• Growth of household spending and business fixed investment slowed in the first quarter.

• On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent.

• On balance, market-based measures of inflation compensation have remained low in recent months, and survey-based measures of longer-term inflation expectations are little changed. 7 Contributions to Real GDP Growth

Contributions to Real GDP Growth quarterly, percent, seasonally adjusted annualized rate

Intellectual Property Products Government Net Exports Nonresidential Equipment & Software Private Inventory Investment Residential Investment Nonresidential Structures Consumer Spending Real GDP 6

4 3.2%

2

0

-2

-4 2013 2014 2015 2016 2017 2018

Sources: Bureau of Economic Analysis; Haver Analytics through Q1-19 8 Atlanta Fed Labor Market Distributions Spider Chart

Atlanta Fed Labor Market Distributions Spider Chart

Flows Employer Behavior

Wages

Utilization Confidence/Perceptions

9

Sources: FRB Atlanta, Bureau of Labor Statistics, Department of Labor, National Federation of Independent Businesses, The Conference Board, Haver Analytics www.frbatlanta.org/chcs/labor-market-distributions.aspx?panel=1 Atlanta Fed Labor Market Distributions Spider Chart

Payroll employment Private Flows Job finding rate opening rate Employer Behavior

Initial claims Private (percent of labor force) hires rate

Average hourly Hiring plans earning growth Wages

Employment Cost Job availability Index growth

Work part-time for economic reasons Private quits rate (percent of labor force)

Marginally attached Firms unable to workers (percent of labor fill job openings force) Employment- Unemployment Utilization population ratio Confidence/Perceptions

Sources: FRB Atlanta, Bureau of Labor Statistics, Department of Labor, National 10 Federation of Independent Businesses, The Conference Board, Haver Analytics Atlanta Fed Labor Market Distributions Spider Chart

Dec. 2007 Dec. 2009 Apr. 2019 Maximum (outer ring)

Minimum (inner ring)

Median (middle ring)

Sources: FRB Atlanta, Bureau of Labor Statistics, Department of Labor, National 11 www.frbatlanta.org/chcs/labor-market-distributions.aspx?panel=1 Federation of Independent Businesses, The Conference Board, Haver Analytics Personal Consumption Expenditure (PCE) Price Index

Personal Consumption Expenditure (PCE) Price Index year-over-year percent change, monthly

3.5 PCE Core PCE Trimmed Mean PCE 3.0

2.5

2.0 FOMC Inflation Objective

1.5

1.0

0.5

0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Sources: Bureau of Economic Analysis; Haver 12 Analytics; Federal Reserve Bank of Dallas through March 2019 Atlanta Fed’s Business Inflation Expectations Survey

Atlanta Fed’s Business Inflation Expectations Survey year-ahead unit cost expectations percent, monthly 2.5

2

1.5

1 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19

Source: Atlanta Fed Business Inflation Expectations Survey through April 2019 13 For more information, visit: http://www.frbatlanta.org/research/inflationproject/bie/ The Monetary Policy Response:

• In May, the Committee decided to maintain the target range for the rate at 2-1/4 to 2-1/2 percent.

• In determining the timing and size of future adjustments to the target range for the , the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.

• This assessment will take into account a wide range of information, including: ➢Labor market measures ➢Inflation pressures and expectations ➢Readings on financial and international developments

14 Estimated Impact of Tariff Hikes and Trade Policy Tensions on Gross Capital Investment by U.S. Businesses in 2018

15 Share of Firms Reassessing Capital Expenditure Plans due to Tariff Hikes and Trade Policy Tensions

16 How Firms Are Reassessing Capital Expenditure Plans

17