SF Fed’s Williams to Economists: Now is Ideal Time to Consider Alternative Monetary Policy Frameworks

May 5, 2017

  • Says “adaptability, accessibility, and accountability” are hallmarks of sound strategy
  • Suggests that price-level targeting is worthy of serious consideration by the Fed and Central Banks across the world
  • Tells economists that it’s best to prepare for next economic storm today, while economy is in calmer waters than to wait for next crisis

New York, New York – Today, John C. Williams, president and CEO of the Federal Reserve Bank of San Francisco, told a gathering of economists at the Shadow Open Market Committee that it is an ideal time for central banks across the world to reexamine which monetary policy frameworks and strategies are likely to be most effective in a post-recovery world where natural rates of interest (R*) are at historical lows across the globe (and are likely to stay there for the foreseeable future). He maintained that effective strategies should be able to adapt to change in an uncertain world; they should be accessible and transparent so that the public can plan and act in accordance with the strategy; and they should facilitate accountable benchmarking and performance measurement.

“It’s better to study and debate these issues now, when we’ve attained recovery, than to wait for the next downturn or crisis to hit,” said Williams. “Introspection is healthy and constitutes best practice for any organization.”

Williams explained that historically low natural rates of interest were likely to have a significant impact on the efficacy of conventional monetary policy. The likelihood that [natural interest rates] will remain low for the foreseeable future is one of the reasons I’m convinced that we need to assess the pros and cons of alternative frameworks and strategies,” he said.

In discussing the realities of the post-recession world, where natural interest rates are at historical lows, Williams said that “We can prepare for the next storm by taking appropriate actions in advance to commit to a more resilient framework; a framework that maintains our commitment to price stability and maximum employment; anchors inflation expectations; and has all the advantages of the current regime.

In discussing the need for adaptable, accessible, and accountable monetary policy strategies that will make the U.S. economy resilient and effective in the years ahead, Williams said “a price-level framework merits very serious consideration for central banks including the Fed.”

Kevin Sajdak
Federal Reserve Bank of San Francisco
(415) 977-3631


The Federal Reserve Bank of San Francisco, with branch offices in Los Angeles, Seattle, Salt Lake City, and Portland, and a cash processing office in Phoenix, provides wholesale banking services to financial institutions throughout the nine western states. As the nation’s central bank, the Federal Reserve System formulates monetary policy, serves as a bank regulator, administers certain consumer protection laws, and is fiscal agent for the U.S. government. Follow us on Twitter at twitter.com/sffed.