Of course, I am aware of, and closely monitoring, potential risks. But I want to be clear what that means. It’s often said that the economy isn’t the stock market and the stock market isn’t the economy. That’s very true. Short-term fluctuations or even daily dives aren’t accurate reflections of the state of the vast, intricate, multilayered U.S. economy. And they shouldn’t be viewed as the four horsemen of the apocalypse. Remember, the expansion of the 1980s wasn’t derailed by the crash of ’87, and we sailed through the Asian financial crisis a decade later. I say “remember”—some of you here will actually remember and others will remember it from your high school history class.
From a policymaker’s perspective, my concern isn’t as simple as whether markets are up or down. Watching a stock ticker isn’t the way to gauge America’s economic health. As Paul Samuelson famously said, the stock market has predicted nine out of the past five recessions. What’s important is how it impacts jobs and inflation in the U.S.
At the risk of puncturing some of the more colorful theories about what drives the Fed, I lay before you the cold, hard truth: Fed policymakers are even more boring than you think. Because all we see is our mandate. How does this affect American jobs and growth? What does this mean for households’ buying power?