Barkin: Operating with Limited Data

I am pleased to be here today to discuss a core part of the Federal Reserve's mission: banking supervision.1 Much of what the Fed does to conduct monetary policy, promote a stable financial system, provide a safe and efficient payments system, and support consumers and community development depends on a healthy banking system. Lending fuels entrepreneurship, helps families buy homes, and enables communities to thrive—all critical aspects of a healthy economy. Ensuring banks operate in a safe and sound manner is essential because the banking system sits at the center of the economy. That is why banks' risk-taking must always be guided by clear guardrails, underpinned by effective banking supervision. We need these guardrails because experience shows that market discipline alone does not prevent excessive risk-taking by banks.2 As I've noted before, time and again, periods of relative financial calm have led to efforts to weaken regulation and supervision.3 This has often had dire consequences, as we saw prominently during the Global Financial Crisis. In the midst of that crisis, I saw first-hand in my own community in Michigan what weak regulation and supervision could mean: foreclosed homes, shuttered businesses, and lost jobs. According to the Federal Reserve Bank of Chicago, Michigan's unemployment rate was 14.9 percent in 2009, meaning one in seven workers were out of jobs.4 Nationwide, the consequences were immense: nearly 9 million jobs lost, 8 million homes foreclosed upon, and a $17 trillion loss in household wealth.5 We are now, I believe, at a moment of inflection in the regulatory and supervisory approaches that help keep banks healthy. There are growing pressures to weaken supervision—to scale back examiner coverage, to dilute ratings systems, and to redefine "unsafe and unsound"—in ways that will make it harder for examiners to act before it is too late to prevent a build-up of excessive risk. These pressures present real dangers to the American people. The Mission of Banking Supervision Let me begin with the mission of bank supervision, which is to promote a safe, sound, and efficient banking system that supports a strong economy.6 Our banking system relies on trust. That trust is earned when banks behave responsibly and when supervisors effectively perform their statutory duties. These duties include verifying that banks are operating soundly and identifying and addressing weaknesses before they threaten the solvency of particular Fed's Barr: Bank supervision relies on credible ratings and strong staff. Fed's Barr: Moves to weaken bank supervision present real dangers.

BoJ's Governor Ueda: We discussed the economy at home and abroad with Takaichi BoJ's Governor Ueda: I will decide monetary policy while scrutinising various data BoJ's Governor Ueda: I told the PM the BoJ is in the process of gradual adjustment of easing BoJ's Governor Ueda: We discussed FX, but I won't comment on the details BoJ's Governor Ueda: The mechanism of rising prices and wages is recovering

The Bank of England appears to pin rising inactivity on a 'change to the supply of labour, independent of demand'. According to this view, such a fall in labour supply would then put upward pressure on wages. This could in turn contribute to further cost-push inflation at a time of already double-digit inflation. If true, this can be seen as justification for a policy of raising interest rates. Experimenting with different assumptions and risks in a forecasting apparatus can help think through uncertainties, but forecasts are even more error-prone in turbulent times. Credible research design and measurement, not tweaks to forecasting models or communications, can bridge evidence gaps that distort economic policy and skew narratives. As the Bank undertakes reforms, this is an appropriate place to reiterate this message and highlight where research could bridge the evidence gaps that obscure our understanding of the economy today. In fact, areas where inactivity rose by more experienced smaller wage growth, not larger.