Federal Reseve Bank President Speech

Fascinating speech by the President of the Federal Reserve Bank of SF. Touches upon a subject I’m preoccupied with, the housing bubble (critical section: “Certainly, analyses do indicate that house prices are abnormally high—that there is a ‘bubble’ element, even accounting for factors that would support high house prices, such as low mortgage interest rates. So a reversal is certainly a possibility. Moreover, even the portion of house prices that is explained by low mortgage rates is at risk.”).

But the section on inflation is also fascinating. Probably remedial for econ majors but I took 0 econ classes, so. Like, the expectation of inflation is a major driver of how much inflation occurs. If we expect a lot, we act like it, and it makes it happen. Same with expectations of low inflation. So dealing with inflation requires in large part managing expectations. That’s fascinating.