To read the speech by Fed Governor Christopher Waller on May 30 2020 on US inflation.....¶
Source: https://www.federalreserve.gov/newsevents/speech/waller20220530a.htm
Since Google Colab is built on Linux we can execute Linux commands in Colab and one of the commands to retrieve datasets is wget. wget stands for 'web get' and using this command will retrieve the dataset directly from the source straight to the Google Drive without being downloaded to your computer.
In [6]:
!wget https://raw.githubusercontent.com/cyrus723/my-first-binder/main/data/waller05302022.txt
--2022-06-04 06:15:18-- https://raw.githubusercontent.com/cyrus723/my-first-binder/main/data/waller05302022.txt Resolving raw.githubusercontent.com (raw.githubusercontent.com)... 185.199.108.133, 185.199.109.133, 185.199.110.133, ... Connecting to raw.githubusercontent.com (raw.githubusercontent.com)|185.199.108.133|:443... connected. HTTP request sent, awaiting response... 200 OK Length: 26156 (26K) [text/plain] Saving to: ‘waller05302022.txt’ waller05302022.txt 100%[===================>] 25.54K --.-KB/s in 0.001s 2022-06-04 06:15:18 (18.2 MB/s) - ‘waller05302022.txt’ saved [26156/26156]
read() – read all text from a file into a string. This method is useful if you have a small file and you want to manipulate the whole text of that file.
readline() – read the text file line by line and return all the lines as strings.
readlines() – read all the lines of the text file and return them as a list of strings.
In [19]:
#Open the text file :
text_file = open("waller05302022.txt", 'r')
#Read the data :
text = text_file.read()
# Let's try to find text_file
print(type(text_file))
print("\n")
print(50 * '-')
print("\n")
print(text_file)
<class '_io.TextIOWrapper'> -------------------------------------------------- <_io.TextIOWrapper name='waller05302022.txt' mode='r' encoding='UTF-8'>
In [ ]:
#Datatype of the data read :
print (type(text))
print("\n")
#Length of the text :
print (len(text))
print("\n")
#Print the text :
print(text)
In [27]:
print(text_file.read()) # print nothing
Now if you try to call the read method again, you will see that nothing will be printed on the console:¶
This is because once you call the read method, the cursor is moved to the end of the text. Therefore, when you call read again, nothing is displayed since there is no more text to print.
A solution to this problem is that after calling the read() method, call the seek() method and pass 0 as the argument. This will move the cursor back to the start of the text file. Look at the following script to see how this works:
A solution to this problem is that after calling the read() method, call the seek() method and pass 0 as the argument. This will move the cursor back to the start of the text file. Look at the following script to see how this works:
In [ ]:
text_file.seek(0)
print(text_file.read())
In many cases this makes the text easier to work with. For example, we can now easily iterate through each line and print the first word in the line.
In [ ]:
text_file.seek(0)
for lines in text_file:
print(lines.split())
In [40]:
text_file.close()
In [ ]:
with open("waller05302022.txt", 'r') as f:
contents = f.read()
print(contents)
In [ ]:
In [ ]:
In [ ]:
import urllib
url='https://raw.githubusercontent.com/cyrus723/my-first-binder/main/data/waller05302022.txt'
myfile = urllib.request.urlopen(url)
for line in myfile:
print (line)
In [55]:
from urllib import request
url = "https://raw.githubusercontent.com/cyrus723/my-first-binder/main/data/waller05302022.txt"
response = request.urlopen(url)
raw = response.read().decode('utf8')
print(len(raw))
26145
In [58]:
print(type(raw))
print(len(raw))
raw[:75]
<class 'str'> 26145
Out[58]:
'Thank you, Professor Wieland, for the introduction, and thank you to the In'
In [59]:
import nltk
nltk.download('punkt')
tokens = nltk.word_tokenize(raw)
print(50 * "-")
print(type(tokens))
print(50 * "-")
print(len(tokens))
print(50 * "-")
tokens[:10]
[nltk_data] Downloading package punkt to /root/nltk_data... [nltk_data] Package punkt is already up-to-date! -------------------------------------------------- <class 'list'> -------------------------------------------------- 4800 --------------------------------------------------
Out[59]:
['Thank', 'you', ',', 'Professor', 'Wieland', ',', 'for', 'the', 'introduction', ',']
In [ ]:
In [ ]:
In [ ]:
In [ ]:
import requests
url='https://raw.githubusercontent.com/cyrus723/my-first-binder/main/data/waller05302022.txt'
response = requests.get(url)
print(response.text)
print(type(response))
print(response)
print(type(response.text))
response.text
In [61]:
raw2=response.text
len(raw2)
Out[61]:
26145
In [62]:
import nltk
nltk.download('punkt')
tokens = nltk.word_tokenize(raw2)
print(50 * "-")
print(type(tokens))
print(50 * "-")
print(len(tokens))
print(50 * "-")
tokens[:10]
[nltk_data] Downloading package punkt to /root/nltk_data... [nltk_data] Package punkt is already up-to-date! -------------------------------------------------- <class 'list'> -------------------------------------------------- 4800 --------------------------------------------------
Out[62]:
['Thank', 'you', ',', 'Professor', 'Wieland', ',', 'for', 'the', 'introduction', ',']
In [ ]:
In [ ]:
#Import required libraries :
import nltk
from nltk import sent_tokenize
from nltk import word_tokenize
import nltk
nltk.download("popular")
In [ ]:
In [ ]:
#Tokenize the text by sentences :
sentences = sent_tokenize(raw2)
#How many sentences are there? :
print (len(sentences))
#Print the sentences :
#print(sentences)
sentences
In [ ]:
In [72]:
#Tokenize the text with words :
words = word_tokenize(raw2)
#How many words are there? :
print (len(words))
print("\n")
#Print words :
print (words)
words[:10]
4800
['Thank', 'you', ',', 'Professor', 'Wieland', ',', 'for', 'the', 'introduction', ',', 'and', 'thank', 'you', 'to', 'the', 'Institute', 'for', 'Monetary', 'and', 'Financial', 'Stability', 'for', 'the', 'opportunity', 'to', 'speak', 'to', 'you', 'today.1', 'I', 'come', 'here', 'at', 'a', 'moment', 'of', 'great', 'challenge', 'for', 'Germany', 'and', 'Europe', ',', 'and', 'a', 'moment', 'in', 'which', 'it', 'has', 'never', 'been', 'more', 'evident', 'that', 'the', 'interests', 'of', 'Europe', 'and', 'the', 'United', 'States', 'are', 'closely', 'aligned', '.', 'America', 'stands', 'with', 'Europe', 'in', 'defending', 'Ukraine', 'because', 'we', 'all', 'understand', 'that', 'an', 'assault', 'on', 'democracy', 'in', 'Europe', 'is', 'a', 'threat', 'to', 'democracy', 'everywhere', '.', 'We', 'also', 'face', 'the', 'common', 'challenge', 'of', 'excessive', 'inflation', ',', 'which', 'is', 'no', 'coincidence', ',', 'since', 'Germany', 'and', 'other', 'countries', 'are', 'dealing', 'with', 'many', 'of', 'the', 'same', 'forces', 'driving', 'up', 'inflation', 'in', 'the', 'United', 'States', '.', 'Fortunately', ',', 'in', 'response', 'to', 'this', 'moment', 'of', 'common', 'challenges', 'and', 'interests', ',', 'Europe', 'and', 'the', 'United', 'States', 'have', 'strengthened', 'our', 'ties', 'and', 'I', 'believe', 'we', 'are', 'more', 'unified', 'today', 'than', 'we', 'have', 'been', 'for', 'decades', '.', 'We', 'see', 'that', 'in', 'the', 'deepening', 'and', 'possible', 'broadening', 'of', 'our', 'security', 'commitments', ',', 'and', 'we', 'also', 'see', 'it', 'in', 'the', 'strong', 'commitment', 'that', 'central', 'banks', 'in', 'Europe', 'and', 'elsewhere', 'have', 'made', 'to', 'fight', 'inflation', '.', 'In', 'today', "'s", 'distinguished', 'lecture', 'I', 'will', 'deal', 'with', 'two', 'distinct', 'topics', ',', 'both', 'of', 'which', 'I', 'believe', 'will', 'be', 'of', 'interest', '.', 'First', ',', 'I', 'will', 'provide', 'my', 'outlook', 'for', 'the', 'U.S.', 'economy', 'and', 'how', 'the', 'Federal', 'Reserve', 'plans', 'to', 'reduce', 'inflation', 'and', 'achieve', 'our', '2', 'percent', 'target', '.', 'Then', 'I', 'will', 'pivot', 'to', 'a', 'more', 'academic', 'discussion', 'of', 'the', 'labor', 'market', 'and', 'the', 'possibility', 'of', 'a', 'soft', 'landing', 'in', 'which', 'taming', 'inflation', 'does', 'not', 'harm', 'employment', '.', 'Let', 'me', 'start', 'with', 'the', 'economic', 'outlook', 'for', 'the', 'United', 'States', '.', 'Despite', 'a', 'pause', 'early', 'this', 'year', 'in', 'the', 'growth', 'of', 'real', 'gross', 'domestic', 'product', '(', 'GDP', ')', ',', 'the', 'U.S.', 'economy', 'continues', 'to', 'power', 'along', 'at', 'a', 'healthy', 'pace', '.', 'The', 'contraction', 'in', 'output', 'reported', 'in', 'the', 'first', 'quarter', 'was', 'due', 'to', 'swings', 'in', 'two', 'volatile', 'categories', ',', 'inventories', 'and', 'net', 'exports', ',', 'and', 'I', 'do', "n't", 'expect', 'them', 'to', 'be', 'repeated', '.', 'Consumer', 'spending', 'and', 'business', 'investment', ',', 'which', 'are', 'the', 'bedrock', 'of', 'GDP', ',', 'were', 'both', 'strong', ',', 'and', 'more', 'recent', 'data', 'point', 'toward', 'solid', 'demand', 'and', 'continuing', 'momentum', 'in', 'the', 'economy', 'that', 'will', 'sustain', 'output', 'growth', 'in', 'the', 'months', 'ahead', '.', 'Another', 'sign', 'of', 'strength', 'is', 'the', 'labor', 'market', ',', 'which', 'has', 'created', '2', 'million', 'jobs', 'in', 'the', 'first', 'four', 'months', 'of', '2022', 'at', 'a', 'remarkably', 'steady', 'pace', 'that', 'is', 'down', 'only', 'slightly', 'from', 'the', '562,000', 'a', 'month', 'last', 'year', '.', 'Unemployment', 'is', 'near', 'a', '50-year', 'low', ',', 'and', 'both', 'the', 'low', 'numbers', 'of', 'people', 'filing', 'for', 'unemployment', 'benefits', 'and', 'the', 'high', 'number', 'of', 'job', 'openings', 'indicate', 'that', 'the', 'slowdown', 'in', 'the', 'economy', 'from', 'the', 'fast', 'pace', 'of', 'last', 'year', 'is', "n't", 'yet', 'weighing', 'on', 'the', 'job', 'market', '.', 'Some', 'look', 'at', 'labor', 'force', 'participation', ',', 'which', 'is', 'below', 'its', 'pre-COVID-19', 'level', ',', 'as', 'leaving', 'a', 'lot', 'of', 'room', 'for', 'improvement', '.', 'However', ',', 'there', 'are', 'underlying', 'factors', 'that', 'explain', 'why', 'participation', 'is', 'depressed', ',', 'including', 'early', 'retirements', 'and', 'individual', 'choices', 'associated', 'with', 'COVID', 'concerns', '.', 'Whatever', 'the', 'cause', ',', 'low', 'participation', 'has', 'contributed', 'to', 'the', 'fact', 'that', 'there', 'are', 'two', 'job', 'vacancies', 'for', 'every', 'one', 'person', 'counted', 'looking', 'for', 'a', 'job', ',', 'a', 'record', 'high', '.', 'Before', 'the', 'pandemic', ',', 'when', 'the', 'labor', 'market', 'was', 'in', 'very', 'solid', 'shape', ',', 'there', 'was', 'one', 'vacancy', 'for', 'every', 'two', 'unemployed', 'people', '.', 'As', 'I', 'will', 'explain', ',', 'this', 'very', 'tight', 'labor', 'market', 'has', 'implications', 'for', 'inflation', 'and', 'the', 'Fed', "'s", 'plans', 'for', 'reducing', 'inflation', '.', 'But', 'on', 'its', 'own', 'terms', ',', 'we', 'need', 'to', 'recognize', 'that', 'robust', 'job', 'creation', 'is', 'an', 'underlying', 'strength', 'of', 'the', 'U.S.', 'economy', ',', 'which', 'is', 'expanding', 'its', 'productive', 'capacity', 'and', 'supporting', 'personal', 'income', 'and', 'ongoing', 'economic', 'growth', ',', 'in', 'the', 'face', 'of', 'other', 'challenges', '.', 'Let', 'me', 'turn', 'now', 'to', 'the', 'outlook', 'for', 'the', 'Fed', "'s", 'top', 'priority', ',', 'inflation', '.', 'I', 'said', 'in', 'December', 'that', 'inflation', 'was', 'alarmingly', 'high', ',', 'and', 'it', 'has', 'remained', 'so', '.', 'The', 'April', 'consumer', 'price', 'index', '(', 'CPI', ')', 'was', 'up', '8.3', 'percent', 'year', 'over', 'year', '.', 'This', 'headline', 'number', 'was', 'a', 'slight', 'decline', 'from', '8.5', 'percent', 'in', 'March', 'but', 'primarily', 'due', 'to', 'a', 'drop', 'in', 'volatile', 'gasoline', 'prices', 'that', 'we', 'know', 'surged', 'again', 'this', 'month', '.', 'Twelve-month', '``', 'core', "''", 'inflation', ',', 'which', 'strips', 'out', 'volatile', 'food', 'and', 'energy', 'prices', ',', 'was', 'also', 'down', 'slightly', 'to', '6.2', 'percent', 'in', 'April', ',', 'from', '6.5', 'percent', 'the', 'month', 'before', ',', 'but', 'the', '0.6', 'percent', 'monthly', 'increase', 'from', 'March', 'was', 'an', 'acceleration', 'from', 'the', 'February', 'to', 'March', 'rate', 'and', 'still', 'too', 'high', '.', 'Meanwhile', ',', 'the', 'Fed', "'s", 'preferred', 'measure', 'based', 'on', 'personal', 'consumption', 'expenditures', '(', 'PCE', ')', 'recorded', 'headline', 'inflation', 'of', '6.3', 'percent', 'and', 'core', 'of', '4.9', 'percent', '.', 'These', 'lower', 'readings', 'relative', 'to', 'CPI', 'reflect', 'differences', 'in', 'the', 'weights', 'of', 'various', 'categories', 'across', 'these', 'indexes', '.', 'No', 'matter', 'which', 'measure', 'is', 'considered', ',', 'however', ',', 'headline', 'inflation', 'has', 'come', 'in', 'above', '4', 'percent', 'for', 'about', 'a', 'year', 'and', 'core', 'inflation', 'is', 'not', 'coming', 'down', 'enough', 'to', 'meet', 'the', 'Fed', "'s", 'target', 'anytime', 'soon', '.', 'Inflation', 'this', 'high', 'affects', 'everyone', 'but', 'is', 'especially', 'painful', 'for', 'lower-', 'and', 'middle-income', 'households', 'that', 'spend', 'a', 'large', 'share', 'of', 'their', 'income', 'on', 'shelter', ',', 'groceries', ',', 'gasoline', ',', 'and', 'other', 'necessities', '.', 'It', 'is', 'the', 'FOMC', "'s", 'job', 'to', 'meet', 'our', 'price', 'stability', 'mandate', 'and', 'get', 'inflation', 'down', ',', 'and', 'we', 'are', 'determined', 'to', 'do', 'so', '.', 'The', 'forces', 'driving', 'inflation', 'today', 'are', 'the', 'same', 'ones', 'that', 'emerged', 'a', 'year', 'ago', '.', 'The', 'combination', 'of', 'strong', 'consumer', 'demand', 'and', 'supply', 'constraints—both', 'bottlenecks', 'and', 'a', 'shortage', 'of', 'workers', 'relative', 'to', 'labor', 'demand—is', 'generating', 'very', 'high', 'inflation', '.', 'We', 'can', 'argue', 'about', 'whether', 'supply', 'or', 'demand', 'is', 'a', 'greater', 'factor', ',', 'but', 'the', 'details', 'have', 'no', 'bearing', 'on', 'the', 'fact', 'that', 'we', 'are', 'not', 'meeting', 'the', 'FOMC', "'s", 'price', 'stability', 'mandate', '.', 'What', 'I', 'care', 'about', 'is', 'getting', 'inflation', 'down', 'so', 'that', 'we', 'avoid', 'a', 'lasting', 'escalation', 'in', 'the', 'public', "'s", 'expectations', 'of', 'future', 'inflation', '.', 'Once', 'inflation', 'expectations', 'become', 'unanchored', 'in', 'this', 'way', ',', 'it', 'is', 'very', 'difficult', 'and', 'economically', 'painful', 'to', 'lower', 'them', '.', 'While', 'it', 'is', 'not', 'surprising', 'that', 'inflation', 'expectations', 'for', 'the', 'next', 'year', 'are', 'up', ',', 'since', 'current', 'inflation', 'is', 'high', ',', 'what', 'I', 'focus', 'on', 'is', 'longer-term', 'inflation', 'expectations', '.', 'Recent', 'data', 'that', 'try', 'to', 'measure', 'longer-term', 'expectations', 'are', 'mixed', '.', 'Overall', ',', 'my', 'assessment', 'is', 'that', 'longer-range', 'inflation', 'expectations', 'have', 'moved', 'up', 'from', 'a', 'level', 'that', 'was', 'consistent', 'with', 'trend', 'inflation', 'below', '2', 'percent', 'to', 'a', 'level', 'that', "'s", 'consistent', 'with', 'underlying', 'inflation', 'a', 'little', 'above', '2', 'percent', '.', 'I', 'will', 'be', 'watching', 'that', 'these', 'expectations', 'do', 'not', 'continue', 'to', 'rise', 'because', 'longer-term', 'inflation', 'expectations', 'influence', 'near', 'term', 'inflation', ',', 'as', 'well', 'as', 'our', 'ability', 'to', 'achieve', 'our', '2', 'percent', 'target', '.', 'When', 'they', 'are', 'anchored', ',', 'they', 'influence', 'spending', 'decisions', 'today', 'in', 'a', 'way', 'that', 'helps', 'inflation', 'move', 'toward', 'our', 'target', '.', 'To', 'ensure', 'these', 'longer-term', 'expectations', 'do', 'not', 'move', 'up', 'broadly', ',', 'the', 'Federal', 'Reserve', 'has', 'tools', 'to', 'reduce', 'demand', ',', 'which', 'should', 'ease', 'inflation', 'pressures', '.', 'And', ',', 'over', 'time', ',', 'supply', 'constraints', 'will', 'resolve', 'to', 'help', 'rein', 'in', 'price', 'increases', 'as', 'well', ',', 'although', 'we', 'do', "n't", 'know', 'how', 'soon', '.', 'I', 'can', 'not', 'emphasize', 'enough', 'that', 'my', 'FOMC', 'colleagues', 'and', 'I', 'are', 'united', 'in', 'our', 'commitment', 'to', 'do', 'what', 'it', 'takes', 'to', 'bring', 'inflation', 'down', 'and', 'achieve', 'the', 'Fed', "'s", '2', 'percent', 'target', '.', 'Since', 'the', 'start', 'of', 'this', 'year', ',', 'the', 'FOMC', 'has', 'raised', 'the', 'target', 'range', 'for', 'the', 'federal', 'funds', 'rate', 'by', '75', 'basis', 'points', ',', 'with', '50', 'basis', 'points', 'of', 'that', 'increase', 'coming', 'at', 'our', 'meeting', 'earlier', 'this', 'month', '.', 'We', 'also', 'issued', 'forward', 'guidance', 'about', 'the', 'likely', 'path', 'of', 'policy', '.', 'The', 'May', 'FOMC', 'statement', 'said', 'the', 'Committee', '``', 'anticipates', 'that', 'ongoing', 'increases', 'in', 'the', 'target', 'range', 'will', 'be', 'appropriate', '.', "''", 'I', 'support', 'tightening', 'policy', 'by', 'another', '50', 'basis', 'points', 'for', 'several', 'meetings', '.', 'In', 'particular', ',', 'I', 'am', 'not', 'taking', '50', 'basis-point', 'hikes', 'off', 'the', 'table', 'until', 'I', 'see', 'inflation', 'coming', 'down', 'closer', 'to', 'our', '2', 'percent', 'target', '.', 'And', ',', 'by', 'the', 'end', 'of', 'this', 'year', ',', 'I', 'support', 'having', 'the', 'policy', 'rate', 'at', 'a', 'level', 'above', 'neutral', 'so', 'that', 'it', 'is', 'reducing', 'demand', 'for', 'products', 'and', 'labor', ',', 'bringing', 'it', 'more', 'in', 'line', 'with', 'supply', 'and', 'thus', 'helping', 'rein', 'in', 'inflation', '.', 'This', 'is', 'my', 'projection', 'today', ',', 'given', 'where', 'we', 'stand', 'and', 'how', 'I', 'expect', 'the', 'economy', 'to', 'evolve', '.', 'Of', 'course', ',', 'my', 'future', 'decisions', 'will', 'depend', 'on', 'incoming', 'data', '.', 'In', 'the', 'next', 'couple', 'of', 'weeks', ',', 'for', 'example', ',', 'the', 'May', 'employment', 'and', 'CPI', 'reports', 'will', 'be', 'released', '.', 'Those', 'are', 'two', 'key', 'pieces', 'of', 'data', 'I', 'will', 'be', 'watching', 'to', 'get', 'information', 'about', 'the', 'continuing', 'strength', 'of', 'the', 'labor', 'market', 'and', 'about', 'the', 'momentum', 'in', 'price', 'increases', '.', 'Over', 'a', 'longer', 'period', ',', 'we', 'will', 'learn', 'more', 'about', 'how', 'monetary', 'policy', 'is', 'affecting', 'demand', 'and', 'how', 'supply', 'constraints', 'are', 'evolving', '.', 'If', 'the', 'data', 'suggest', 'that', 'inflation', 'is', 'stubbornly', 'high', ',', 'I', 'am', 'prepared', 'to', 'do', 'more', '.', 'My', 'plan', 'for', 'rate', 'hikes', 'is', 'roughly', 'in', 'line', 'with', 'the', 'expectations', 'of', 'financial', 'markets', '.', 'As', 'seen', 'in', 'slide', '1', ',', 'federal', 'funds', 'futures', 'are', 'pricing', 'in', 'roughly', '50', 'basis', 'point', 'hikes', 'at', 'the', 'FOMC', "'s", 'next', 'two', 'meetings', 'and', 'expecting', 'the', 'year-end', 'policy', 'rate', 'to', 'be', 'around', '2.65', 'percent', '.', 'So', ',', 'in', 'total', ',', 'markets', 'expect', 'about', '2.5', 'percentage', 'points', 'of', 'tightening', 'this', 'year', '.', 'This', 'expectation', 'represents', 'a', 'significant', 'degree', 'of', 'policy', 'tightening', ',', 'consistent', 'with', 'the', 'FOMC', "'s", 'commitment', 'to', 'get', 'inflation', 'back', 'under', 'control', 'and', ',', 'if', 'we', 'need', 'to', 'do', 'more', ',', 'we', 'will', '.', 'These', 'current', 'and', 'anticipated', 'policy', 'actions', 'have', 'already', 'resulted', 'in', 'a', 'significant', 'tightening', 'of', 'financial', 'conditions', '.', 'The', 'benchmark', '10-year', 'Treasury', 'security', 'began', 'the', 'year', 'at', 'a', 'yield', 'of', 'around', '1.5', 'percent', 'and', 'has', 'risen', 'to', 'around', '2.8', 'percent', '.', 'Rates', 'for', 'home', 'mortgages', 'are', 'up', '200', 'basis', 'points', ',', 'and', 'other', 'credit', 'financing', 'costs', 'have', 'followed', 'suit', '.', 'Higher', 'rates', 'make', 'it', 'more', 'expensive', 'to', 'finance', 'spending', 'and', 'investment', 'which', 'should', 'help', 'reduce', 'demand', 'and', 'contribute', 'to', 'lower', 'inflation', '.', 'In', 'addition', 'to', 'raising', 'rates', ',', 'the', 'FOMC', 'further', 'tightened', 'monetary', 'policy', 'by', 'ending', 'asset', 'purchases', 'in', 'March', 'and', 'then', 'agreeing', 'to', 'start', 'reducing', 'our', 'holdings', 'of', 'securities', ',', 'a', 'process', 'that', 'begins', 'June', '1', '.', 'By', 'allowing', 'securities', 'to', 'mature', 'without', 'reinvesting', 'them', ',', 'the', 'Fed', "'s", 'balance', 'sheet', 'will', 'shrink', '.', 'We', 'will', 'phase', 'in', 'the', 'amount', 'of', 'redemptions', 'over', 'three', 'months', '.', 'By', 'September', ',', 'we', 'anticipate', 'having', 'up', 'to', '$', '95', 'billion', 'of', 'securities', 'rolling', 'off', 'the', 'Fed', "'s", 'portfolio', 'each', 'month', '.', 'This', 'pace', 'will', 'reduce', 'the', 'Fed', "'s", 'securities', 'holdings', 'by', 'about', '$', '1', 'trillion', 'over', 'the', 'next', 'year', ',', 'and', 'the', 'reductions', 'will', 'continue', 'until', 'securities', 'holdings', 'are', 'deemed', 'close', 'to', 'the', 'ample', 'levels', 'needed', 'to', 'implement', 'policy', 'efficiently', 'and', 'effectively', '.', 'Although', 'estimates', 'are', 'highly', 'uncertain', ',', 'using', 'a', 'variety', 'of', 'models', 'and', 'assumptions', ',', 'the', 'overall', 'reduction', 'in', 'the', 'balance', 'sheet', 'is', 'estimated', 'to', 'be', 'equivalent', 'to', 'a', 'couple', 'of', '25-basis-point', 'rate', 'hikes', '.', 'All', 'these', 'actions', 'have', 'the', 'goal', 'of', 'bringing', 'inflation', 'down', 'toward', 'the', 'FOMC', "'s", '2', 'percent', 'target', '.', 'Increased', 'rates', 'and', 'a', 'smaller', 'balance', 'sheet', 'raise', 'the', 'cost', 'of', 'borrowing', 'and', 'thus', 'reduce', 'household', 'and', 'business', 'demand', '.', 'On', 'top', 'of', 'this', ',', 'I', 'also', 'hope', 'that', 'over', 'time', 'supply', 'problems', 'resolve', 'and', 'help', 'lower', 'inflation', '.', 'But', 'the', 'Fed', 'is', "n't", 'waiting', 'for', 'these', 'supply', 'constraints', 'to', 'resolve', '.', 'We', 'have', 'the', 'tools', 'and', 'the', 'will', 'to', 'make', 'substantial', 'progress', 'toward', 'our', 'target', '.', 'The', 'United', 'States', 'is', 'not', 'alone', 'in', 'facing', 'excessive', 'inflation', ',', 'and', 'other', 'central', 'banks', 'also', 'are', 'responding', '.', 'There', 'is', 'a', 'global', 'shift', 'toward', 'monetary', 'tightening', '.', 'In', 'the', 'euro', 'area', ',', 'headline', 'inflation', 'continued', 'to', 'edge', 'up', 'in', 'April', ',', 'to', '7.5', 'percent', ',', 'while', 'its', 'version', 'of', 'core', 'inflation', 'increased', 'from', '2.9', 'percent', 'to', '3.5', 'percent', '.', 'Based', 'on', 'this', 'broadening', 'of', 'price', 'pressures', ',', 'communication', 'by', 'the', 'European', 'Central', 'Bank', '(', 'ECB', ')', 'is', 'widely', 'interpreted', 'as', 'signaling', 'that', 'it', 'will', 'likely', 'start', 'raising', 'its', 'policy', 'rate', 'this', 'summer', 'and', 'that', 'it', 'could', 'raise', 'rates', 'a', 'few', 'times', 'before', 'year-end', '.', 'Policy', 'tightening', 'started', 'last', 'year', ',', 'as', 'emerging', 'markets', 'including', 'Mexico', 'and', 'Brazil', 'increased', 'rates', 'substantially', 'amid', 'expectations', 'of', 'accelerating', 'inflation', '.', 'Several', 'advanced-economy', 'central', 'banks', ',', 'including', 'the', 'Bank', 'of', 'England', ',', 'began', 'raising', 'interest', 'rates', 'in', 'the', 'second', 'half', 'of', 'last', 'year', '.', 'Like', 'the', 'Fed', ',', 'the', 'Bank', 'of', 'Canada', 'lifted', 'off', 'in', 'March', 'and', ',', 'also', 'like', 'the', 'Fed', ',', 'picked', 'up', 'the', 'pace', 'of', 'tightening', 'with', 'a', 'rate', 'hike', 'of', '50', 'basis', 'points', 'at', 'its', 'most', 'recent', 'meeting', '.', 'Central', 'banks', 'in', 'Australia', 'and', 'Sweden', 'pivoted', 'sharply', 'to', 'hike', 'rates', 'at', 'their', 'most', 'recent', 'meetings', 'after', 'previously', 'saying', 'that', 'such', 'moves', 'were', 'not', 'likely', 'anytime', 'soon', '.', 'Slide', '2', 'shows', 'the', 'similarly', 'timed', 'policy', 'responses', 'across', 'advanced', 'and', 'emerging', 'economy', 'central', 'banks', 'in', 'terms', 'of', 'actual', 'and', 'anticipated', 'increases', 'in', 'their', 'policy', 'rates', '.', 'Emerging', 'market', 'economies', 'started', 'the', 'year', 'with', 'a', 'policy', 'rate', 'that', 'averaged', 'around', '3.5', 'percent', ',', 'and', 'they', 'are', 'expected', 'to', 'end', 'the', 'year', 'averaging', 'a', 'bit', 'over', '5', 'percent', '.', 'Advanced', 'foreign', 'economies', 'started', 'a', 'bit', 'below', 'zero', 'and', 'at', 'this', 'point', 'are', 'expected', 'to', 'move', 'up', ',', 'on', 'average', ',', 'by', 'around', '1', 'percentage', 'point', '.', 'This', 'worldwide', 'increase', 'in', 'policy', 'rates', ',', 'unfortunately', ',', 'reflects', 'the', 'fact', 'that', '\xadhigh', 'inflation', 'is', 'a', 'global', 'problem', ',', 'which', 'central', 'banks', 'around', 'the', 'world', 'recognize', 'must', 'be', 'addressed', '.', 'Finally', ',', 'like', 'the', 'Fed', ',', 'many', 'other', 'advanced-economy', 'central', 'banks', 'that', 'expanded', 'their', 'balance', 'sheets', 'over', 'the', 'past', 'two', 'years', 'are', 'now', 'reversing', 'course', '.', 'In', 'recent', 'months', ',', 'as', 'shown', 'in', 'slide', '3', ',', 'the', 'Bank', 'of', 'Canada', 'and', 'Bank', 'of', 'England', 'have', 'begun', 'to', 'shrink', 'their', 'balance', 'sheets', 'by', 'stopping', 'full', 'reinvestment', 'of', 'maturing', 'assets', ',', 'similar', 'to', 'what', 'the', 'Fed', 'will', 'commence', 'in', 'June', '.', 'Although', 'the', 'ECB', 'has', 'committed', 'to', 'reinvesting', 'maturing', 'assets', 'for', 'quite', 'some', 'time', ',', 'it', 'has', 'tapered', 'net', 'purchases', 'substantially', 'since', 'last', 'year', 'and', 'has', 'indicated', 'it', 'will', 'likely', 'end', 'those', 'purchases', 'early', 'in', 'the', 'third', 'quarter', '.', 'Some', 'have', 'expressed', 'concern', 'that', 'the', 'Fed', 'can', 'not', 'raise', 'interest', 'rates', 'to', 'arrest', 'inflation', 'while', 'also', 'avoiding', 'a', 'sharp', 'slowdown', 'in', 'economic', 'growth', 'and', 'significant', 'damage', 'to', 'the', 'labor', 'market', '.', 'One', 'argument', 'in', 'this', 'regard', 'warns', 'that', 'policy', 'tightening', 'will', 'reduce', 'the', 'current', 'high', 'level', 'of', 'job', 'vacancies', 'and', 'push', 'up', 'unemployment', 'substantially', ',', 'based', 'on', 'the', 'historical', 'relationship', 'between', 'these', 'two', 'pieces', 'of', 'data', ',', 'which', 'is', 'depicted', 'by', 'something', 'called', 'the', 'Beveridge', 'curve', '.', 'Because', 'I', 'am', 'now', 'among', 'fellow', 'students', 'of', 'economics', ',', 'I', 'wanted', 'to', 'take', 'a', 'moment', 'to', 'show', 'why', 'this', 'statement', 'may', 'not', 'be', 'correct', 'in', 'current', 'circumstances', '.', 'First', ',', 'a', 'little', 'background', '.', 'The', 'relationship', 'between', 'vacancies', 'and', 'the', 'unemployment', 'rate', 'is', 'shown', 'in', 'slide', '4', '.', 'The', 'blue', 'dots', 'in', 'the', 'figure', 'show', 'observations', 'of', 'the', 'vacancy', 'rate', 'and', 'the', 'unemployment', 'rate', 'between', '2000', 'and', '2018', '.', 'The', 'black', 'curve', 'is', 'the', 'fitted', 'relationship', 'between', 'the', 'log', 'of', 'vacancies', 'and', 'the', 'log', 'of', 'unemployment', 'over', 'this', 'period', '.', 'It', 'has', 'a', 'somewhat', 'flat', ',', 'downward', 'slope', '.', 'From', 'this', ',', 'the', 'argument', 'goes', ',', 'policy', 'to', 'slow', 'demand', 'and', 'push', 'down', 'vacancies', 'requires', 'moving', 'along', 'this', 'curve', 'and', 'increasing', 'the', 'unemployment', 'rate', 'substantially', '.', 'But', 'there', "'s", 'another', 'perspective', 'about', 'what', 'a', 'reduction', 'in', 'vacancies', 'implies', 'for', 'unemployment', 'that', 'is', 'just', 'as', 'plausible', ',', 'if', 'not', 'more', 'so', '.', 'Slide', '5', 'shows', 'the', 'same', 'observations', 'as', 'slide', '4', 'but', 'also', 'adds', 'observations', 'from', 'the', 'pandemic', '.', 'The', 'two', 'larger', 'red', 'dots', 'show', 'the', 'most', 'recent', 'observation', ',', 'March', '2022', ',', 'and', 'January', '2019', ',', 'when', 'the', 'vacancy', 'rate', 'had', 'achieved', 'its', 'highest', 'rate', 'before', 'the', 'pandemic', '.', 'These', 'two', 'dots', 'suggest', 'that', 'the', 'vacancy', 'rate', 'can', 'be', 'reduced', 'substantially', ',', 'from', 'the', 'current', 'level', 'to', 'the', 'January', '2019', 'level', ',', 'while', 'still', 'leaving', 'the', 'level', 'of', 'vacancies', 'consistent', 'with', 'a', 'strong', 'labor', 'market', 'and', 'with', 'a', 'low', 'level', 'of', 'unemployment', ',', 'such', 'as', 'we', 'had', 'in', '2019', '.', 'To', 'see', 'why', 'this', 'is', 'a', 'plausible', 'outcome', ',', 'I', 'first', 'need', 'to', 'digress', 'a', 'bit', 'to', 'discuss', 'the', 'important', 'determinants', 'of', 'unemployment', '.', 'Many', 'factors', 'influence', 'the', 'unemployment', 'rate', ',', 'and', 'vacancies', 'are', 'just', 'one', '.', 'Thus', ',', 'to', 'understand', 'how', 'a', 'lower', 'vacancy', 'rate', 'would', 'influence', 'unemployment', 'going', 'forward', ',', 'we', 'need', 'to', 'separate', 'the', 'direct', 'effect', 'of', 'vacancies', 'on', 'the', 'unemployment', 'rate', 'from', 'other', 'factors', '.', 'To', 'do', 'that', ',', 'we', 'first', 'need', 'to', 'review', 'the', 'factors', 'that', 'account', 'for', 'unemployment', 'movements', '.', 'There', 'are', 'two', 'broad', 'determinants', 'of', 'unemployment', ':', 'separations', 'from', 'employment', '(', 'including', 'layoffs', 'and', 'quits', ')', ',', 'which', 'raise', 'unemployment', ',', 'and', 'job', 'finding', 'by', 'the', 'unemployed', ',', 'which', 'lowers', 'unemployment.2', 'Separations', 'consist', 'largely', 'of', 'layoffs', ',', 'which', 'are', 'typically', 'cyclical', ',', 'surging', 'in', 'recessions', 'and', 'falling', 'during', 'booms', '.', 'Job', 'finding', 'is', 'also', 'highly', 'cyclical', ',', 'rising', 'as', 'the', 'labor', 'market', 'tightens', 'and', 'falling', 'in', 'recessions', '.', 'To', 'see', 'how', 'separations', 'and', 'job', 'finding', 'affect', 'the', 'unemployment', 'rate', ',', 'it', "'s", 'helpful', 'to', 'start', 'with', 'equation', '(', '1', ')', 'on', 'slide', '6', ',', 'which', 'states', 'that', 'in', 'a', 'steady', 'state', '(', 'that', 'is', ',', 'when', 'the', 'unemployment', 'rate', 'is', 'constant', ')', ',', 'flows', 'into', 'unemployment', ',', 'the', 'left', 'side', 'of', 'equation', '(', '1', ')', ',', 'must', 'equal', 'flows', 'out', 'of', 'unemployment', ',', 'the', 'right', 'side', '.', 'Flows', 'into', 'unemployment', 'equal', 'the', 'separations', 'rate', ',', 's', ',', 'times', 'the', 'level', 'of', 'employment', '.', 'For', 'simplicity', ',', 'I', "'ve", 'normalized', 'the', 'labor', 'force', 'to', '1', ',', 'so', 'that', 'employment', 'equals', '1', 'minus', 'unemployment', ',', 'U', '.', 'Flows', 'out', 'of', 'unemployment', ',', 'the', 'right', 'side', 'of', 'the', 'equation', ',', 'equal', 'the', 'rate', 'of', 'job', 'finding', ',', 'f', ',', 'times', 'the', 'number', 'of', 'unemployed', '.', 'Rearranging', 'this', 'equation', 'yields', 'an', 'expression', 'for', 'the', 'steady-state', 'unemployment', 'rate', ',', 'equation', '(', '2', ')', '.3', 'Because', 'flows', 'into', 'and', 'out', 'of', 'unemployment', 'are', 'quite', 'high', ',', 'the', 'actual', 'unemployment', 'rate', 'converges', 'to', 'the', 'steady-state', 'unemployment', 'rate', 'quickly', ',', 'and', 'the', 'steady-state', 'unemployment', 'rate', 'typically', 'tracks', 'the', 'actual', 'rate', 'closely.4', 'So', ',', 'going', 'forward', ',', 'I', "'m", 'going', 'to', 'think', 'of', 'the', 'steady-state', 'unemployment', 'rate', 'as', 'a', 'good', 'approximation', 'of', 'the', 'actual', 'unemployment', 'rate', '.', 'Now', 'let', 'me', 'focus', 'on', 'job', 'finding', ',', 'which', 'is', 'often', 'thought', 'to', 'depend', 'on', 'the', 'number', 'of', 'job', 'vacancies', 'relative', 'to', 'the', 'number', 'of', 'unemployed', 'workers', '.', 'To', 'see', 'why', ',', 'start', 'with', 'equation', '(', '3', ')', 'on', 'slide', '7', ',', 'which', 'states', 'that', 'the', 'number', 'of', 'hires', 'is', 'an', 'increasing', 'function', 'of', 'both', 'the', 'number', 'of', 'job', 'vacancies', 'and', 'the', 'number', 'of', 'unemployed', 'individuals', 'searching', 'for', 'jobs', ':', 'The', 'more', 'firms', 'there', 'are', 'looking', 'for', 'workers', 'and', 'the', 'more', 'workers', 'there', 'are', 'looking', 'for', 'jobs', ',', 'the', 'more', 'matches', ',', 'or', 'hires', ',', 'there', 'will', 'be', '.', 'For', 'convenience', ',', 'I', "'m", 'assuming', 'a', 'mathematical', 'representation', 'of', 'this', 'matching', 'function', 'takes', 'a', 'Cobb-Douglas', 'form', '.', 'If', 'we', 'divide', 'both', 'sides', 'of', 'equation', '(', '3', ')', 'by', 'unemployment', ',', 'we', 'get', 'equation', '(', '4', ')', ',', 'which', 'expresses', 'the', 'job-finding', 'rate', 'as', 'a', 'function', 'of', 'the', 'ratio', 'of', 'vacancies', 'to', 'unemployment', ',', 'or', 'labor', 'market', 'tightness', '.', 'Because', 'we', 'have', 'data', 'for', 'both', 'the', 'left', 'and', 'right', 'sides', 'of', 'equation', '(', '4', ')', ',', 'we', 'can', 'estimate', 'it', 'and', 'obtain', 'parameter', 'values', 'for', 'the', 'elasticity', 'of', 'job', 'finding', 'with', 'respect', 'to', 'labor', 'market', 'tightness', ',', 'sigma', ',', 'and', 'matching', 'efficiency', ',', 'mu.5', 'Matching', 'efficiency', 'represents', 'factors', 'that', 'can', 'increase', '(', 'or', 'decrease', ')', 'job', 'findings', 'without', 'changes', 'in', 'labor', 'market', 'tightness', '.', 'On', 'the', 'one', 'hand', ',', 'if', 'the', 'workers', 'searching', 'for', 'jobs', 'are', 'well', 'suited', 'for', 'the', 'jobs', 'that', 'are', 'available', ',', 'matching', 'efficiency', 'will', 'be', 'high', ';', 'on', 'the', 'other', 'hand', ',', 'if', 'many', 'searching', 'workers', 'are', 'not', 'well', 'suited', 'for', 'the', 'available', 'jobs', ',', 'matching', 'efficiency', 'will', 'be', 'low.6', 'The', 'last', 'step', 'is', 'to', 'plug', 'our', 'expression', 'for', 'job', 'finding', 'into', 'equation', '(', '2', ')', ',', 'the', 'steady-state', 'unemployment', 'rate', ',', 'yielding', 'equation', '(', '5', ')', '.', 'Equation', '(', '5', ')', 'shows', 'how', 'vacancies', 'affect', 'the', 'unemployment', 'rate', '.', 'To', 'illustrate', 'this', 'relationship', ',', 'I', 'solve', 'equation', '(', '5', ')', 'for', 'different', 'values', 'of', 'V', 'and', 's', ',', 'holding', 'the', 'matching', 'efficiency', 'parameters', 'constant', '.', 'That', 'is', ',', 'I', 'pick', 'a', 'separation', 'rate', 'at', 'some', 'level', 'and', 'trace', 'out', 'what', 'happens', 'to', 'the', 'unemployment', 'rate', 'as', 'the', 'vacancy', 'rate', 'changes', '.', 'Then', 'I', 'pick', 'a', 'different', 'separation', 'rate', 'and', 'again', 'trace', 'out', 'the', 'effect', 'of', 'vacancies', 'on', 'unemployment', '.', 'The', 'result', 'is', 'shown', 'on', 'slide', '8', ',', 'which', 'plots', 'four', 'curves', 'showing', 'the', 'effect', 'of', 'vacancies', 'on', 'unemployment', 'for', 'four', 'different', 'separation', 'rates', '.', 'Each', 'curve', 'is', 'convex', ';', 'as', 'the', 'number', 'of', 'vacancies', 'increases', 'relative', 'to', 'the', 'number', 'of', 'individuals', 'looking', 'for', 'work', ',', 'it', 'becomes', 'harder', 'for', 'firms', 'to', 'fill', 'jobs', 'with', 'suitable', 'workers', ',', 'and', 'more', 'jobs', 'remain', 'vacant', '.', 'This', 'is', 'exactly', 'the', 'situation', 'many', 'employers', 'are', 'now', 'experiencing', '.', 'Because', 'more', 'vacancies', 'generate', 'fewer', 'and', 'fewer', 'hires', ',', 'they', 'result', 'in', 'smaller', 'and', 'smaller', 'reductions', 'in', 'unemployment', '.', 'But', 'large', 'numbers', 'of', 'vacancies', 'are', ',', 'of', 'course', ',', 'a', 'hallmark', 'of', 'tight', 'labor', 'markets', 'and', 'additional', 'vacancies', 'continue', 'to', 'strongly', 'boost', 'wage', 'growth', 'and', 'quits', '.', 'The', 'curve', 'farthest', 'to', 'the', 'right', ',', 'labeled', 's=2.5', ',', 'represents', 'a', 'situation', 'when', 'the', 'separations', 'rate', 'is', '2.5', 'percent', ',', 'a', 'historically', 'high', 'level', '.', 'This', 'rate', 'is', 'approximately', 'the', 'level', 'seen', 'in', 'the', 'middle', 'of', '2020', ',', 'just', 'after', 'the', 'onset', 'of', 'the', 'pandemic', '.', 'You', 'can', 'see', 'that', 'when', 'the', 'separations', 'rate', 'is', 'this', 'high', ',', 'the', 'unemployment', 'rate', 'is', 'also', 'going', 'to', 'be', 'high', ',', 'no', 'matter', 'the', 'level', 'of', 'vacancies', '.', 'Now', 'let', "'s", 'think', 'about', 'what', 'happens', 'as', 'the', 'economy', 'recovers', ',', 'as', 'it', 'has', 'over', 'the', 'past', 'two', 'years', '.', 'In', 'an', 'expansion', ',', 'layoffs', 'fall', ',', 'pushing', 'down', 'separations', 'and', 'moving', 'the', 'curve', 'to', 'the', 'left', '.', 'At', 'the', 'same', 'time', ',', 'greater', 'labor', 'demand', 'increases', 'vacancies', ',', 'causing', 'the', 'labor', 'market', 'to', 'move', 'up', 'the', 'steep', 'curves', '.', 'The', 'combination', 'of', 'these', 'movements', 'is', 'shown', 'in', 'slide', '9', 'as', 'the', 'black', 'fitted', 'curve', ',', 'which', 'I', "'ve", 'reproduced', 'from', 'slide', '4', '.', 'As', 'you', 'recall', ',', 'the', 'black', 'curve', 'fits', 'the', 'actual', 'observations', 'on', 'unemployment', 'and', 'vacancies', 'we', 'saw', 'before', 'the', 'pandemic', '.', 'And', 'we', 'now', 'can', 'see', 'that', 'these', 'observations', 'are', 'produced', 'by', 'a', 'combination', 'of', 'changes', 'in', 'vacancies', 'and', 'separations', '(', 'as', 'well', 'as', 'other', 'influences', 'on', 'unemployment', ')', '.', 'Decreases', 'in', 'the', 'separations', 'rate', 'reduce', 'the', 'unemployment', 'rate', 'without', 'changing', 'vacancies', ',', 'imparting', 'a', 'flatness', 'to', 'the', 'fitted', 'curve', 'relative', 'to', 'the', 'steeper', 'curves', 'that', 'only', 'reflect', 'the', 'effect', 'of', 'vacancies', '.', 'If', 'we', 'want', 'to', 'just', 'focus', 'on', 'the', 'effect', 'of', 'vacancies', ',', 'then', 'we', 'should', 'be', 'looking', 'at', 'the', 'steep', 'curves', ',', 'especially', 'when', 'the', 'labor', 'market', 'is', 'tight', ',', 'as', 'it', 'is', 'now', '.', 'What', 'does', 'all', 'this', 'suggest', 'about', 'what', 'will', 'happen', 'to', 'the', 'labor', 'market', 'when', ',', 'as', 'I', 'expect', ',', 'a', 'tightening', 'of', 'financial', 'conditions', 'and', 'fading', 'fiscal', 'stimulus', 'start', 'to', 'cool', 'labor', 'demand', '?', 'Slide', '10', 'focuses', 'on', 'the', 'Beveridge', 'curve', '(', 'the', 'relationship', 'produced', 'by', 'the', 'direct', 'effect', 'of', 'changes', 'in', 'vacancies', 'on', 'unemployment', ')', 'when', 'the', 'separations', 'rate', 'is', 'low', ',', 'as', 'it', 'is', 'now.7', 'The', 'March', '2022', 'observation', 'lies', 'at', 'the', 'top', 'of', 'the', 'curve', 'and', 'is', 'labeled', 'point', 'A', '.', 'If', 'there', 'is', 'cooling', 'in', 'aggregate', 'demand', 'spurred', 'by', 'monetary', 'policy', 'tightening', 'that', 'tempers', 'labor', 'demand', ',', 'then', 'vacancies', 'should', 'fall', 'substantially', '.', 'Suppose', 'they', 'decrease', 'from', 'the', 'current', 'level', 'of', '7', 'percent', 'to', '4.6', 'percent', ',', 'the', 'rate', 'prevailing', 'in', 'January', '2019', ',', 'when', 'the', 'labor', 'market', 'was', 'still', 'quite', 'strong', '.', 'Then', 'we', 'should', 'travel', 'down', 'the', 'curve', 'from', 'point', 'A', 'to', 'point', 'B.8', 'The', 'unemployment', 'rate', 'will', 'increase', ',', 'but', 'only', 'somewhat', 'because', 'labor', 'demand', 'is', 'still', 'strong—just', 'not', 'as', 'strong—and', 'because', 'when', 'the', 'labor', 'market', 'is', 'very', 'tight', ',', 'as', 'it', 'is', 'now', ',', 'vacancies', 'generate', 'relatively', 'few', 'hires', '.', 'Indeed', ',', 'hires', 'per', 'vacancy', 'are', 'currently', 'at', 'historically', 'low', 'levels', '.', 'Thus', ',', 'reducing', 'vacancies', 'from', 'an', 'extremely', 'high', 'level', 'to', 'a', 'lower', '(', 'but', 'still', 'strong', ')', 'level', 'has', 'a', 'relatively', 'limited', 'effect', 'on', 'hiring', 'and', 'on', 'unemployment', '.', 'Now', ',', 'I', 'also', 'show', 'the', 'January', '2019', 'observation', 'of', 'vacancies', 'and', 'unemployment', '.', 'Recall', ',', 'this', 'is', 'also', 'where', 'the', 'economy', 'was', 'over', 'the', 'year', 'prior', 'to', 'the', 'pandemic', '.', 'As', 'you', 'can', 'see', ',', 'moving', 'from', 'the', 'March', '2022', 'observation', 'to', 'the', 'January', '2019', 'observation', 'is', 'not', 'that', 'different', 'from', 'the', 'change', 'in', 'the', 'unemployment', 'rate', 'predicted', 'by', 'my', 'estimated', 'Beveridge', 'curve', ',', 'which', 'suggests', 'the', 'predicted', 'small', 'increase', 'in', 'unemployment', 'is', 'a', 'plausible', 'outcome', 'to', 'policy', 'tightening', '.', 'If', 'labor', 'demand', 'cools', ',', 'will', 'separations', 'increase', 'and', 'shift', 'the', 'curve', 'outward', ',', 'increasing', 'unemployment', 'further', '?', 'I', 'do', "n't", 'think', 'so', '.', 'As', 'shown', 'on', 'slide', '11', ',', 'outside', 'of', 'recessions', ',', 'layoffs', 'do', "n't", 'change', 'much', '.', 'Instead', ',', 'changes', 'in', 'labor', 'demand', 'appear', 'to', 'be', 'reflected', 'primarily', 'in', 'changes', 'in', 'vacancies', '.', 'Now', ',', 'it', "'s", 'certainly', 'possible', ',', 'even', 'probable', ',', 'that', 'influences', 'on', 'the', 'unemployment', 'rate', 'other', 'than', 'vacancies', 'will', 'change', 'going', 'forward', '.', 'In', 'terms', 'of', 'the', 'equations', 'we', 'have', 'been', 'discussing', ',', 'layoffs', 'could', 'increase', 'somewhat', ',', 'instead', 'of', 'staying', 'constant', '.', 'Matching', 'efficiency', 'could', 'also', 'improve', 'or', 'deteriorate', '.', 'The', 'vacancy', 'rate', 'could', 'also', 'change', 'more', 'or', 'less', 'than', 'I', 'have', 'assumed', '.', 'Thus', ',', 'I', "'m", 'not', 'arguing', 'that', 'the', 'unemployment', 'rate', 'will', 'end', 'up', 'exactly', 'as', 'the', 'Beveridge', 'curve', 'I', "'ve", 'drawn', 'suggests', '.', 'But', 'I', 'do', 'think', 'it', 'quite', 'plausible', 'that', 'the', 'unemployment', 'rate', 'will', 'end', 'up', 'in', 'the', 'vicinity', 'of', 'what', 'the', 'Beveridge', 'curve', 'currently', 'predicts', '.', 'Another', 'consideration', 'is', 'that', 'non-linear', 'dynamics', 'could', 'take', 'hold', 'if', 'the', 'unemployment', 'rate', 'increases', 'by', 'a', 'certain', 'amount', ',', 'as', 'suggested', 'by', 'the', 'Sahm', 'rule', ',', 'which', 'holds', 'that', 'recessions', 'have', 'in', 'the', 'past', 'occurred', 'whenever', 'the', 'three-month', 'moving', 'average', 'of', 'the', 'unemployment', 'rate', 'rises', '0.5', 'percentage', 'point', 'over', 'its', 'minimum', 'rate', 'over', 'the', 'previous', '12', 'months.9', 'We', 'certainly', 'need', 'to', 'be', 'alert', 'to', 'this', 'possibility', ',', 'but', 'the', 'past', 'is', 'not', 'always', 'prescriptive', 'of', 'the', 'future', '.', 'The', 'current', 'situation', 'is', 'unique', '.', 'We', "'ve", 'never', 'seen', 'a', 'vacancy', 'rate', 'of', '7', 'percent', 'before', '.', 'Reducing', 'the', 'vacancy', 'rate', 'by', '2.5', 'percentage', 'points', 'would', 'still', 'leave', 'it', 'at', 'a', 'level', 'seen', 'at', 'the', 'end', 'of', 'the', 'last', 'expansion', ',', 'whereas', 'in', 'previous', 'expansions', 'a', 'reduction', 'of', '2.5', 'percent', 'would', 'have', 'left', 'vacancies', 'at', 'or', 'below', '2', 'percent', ',', 'a', 'level', 'only', 'seen', 'in', 'extremely', 'weak', 'labor', 'markets', '.', 'To', 'sum', 'up', ',', 'the', 'relationship', 'between', 'vacancies', 'and', 'unemployment', 'gives', 'me', 'reason', 'to', 'hope', 'that', 'policy', 'tightening', 'in', 'current', 'circumstances', 'can', 'tame', 'inflation', 'without', 'causing', 'a', 'sharp', 'increase', 'in', 'unemployment', '.', 'Of', 'course', ',', 'the', 'path', 'of', 'the', 'economy', 'depends', 'on', 'many', 'factors', ',', 'including', 'how', 'the', 'Ukraine', 'war', 'and', 'COVID-19', 'evolve', '.', 'From', 'this', 'discussion', ',', 'I', 'am', 'left', 'optimistic', 'that', 'the', 'strong', 'labor', 'market', 'can', 'handle', 'higher', 'rates', 'without', 'a', 'significant', 'increase', 'in', 'unemployment', '.', 'In', 'closing', ',', 'I', 'want', 'to', 'again', 'thank', 'the', 'institute', 'for', 'the', 'invitation', 'to', 'address', 'you', 'today', ',', 'at', 'a', 'time', 'of', 'considerable', 'challenge', 'for', 'Germany', 'and', 'the', 'United', 'States', '.', 'It', "'s", 'not', 'the', 'first', 'time', 'we', 'have', 'faced', 'such', 'moments', 'together', '.', 'Just', 'south', 'of', 'the', 'Frankfurt', 'Airport', 'is', 'a', 'surprising', 'sight—a', 'couple', 'of', 'antique', 'military', 'cargo', 'planes', ',', 'parked', 'on', 'the', 'side', 'of', 'the', 'Autobahn', '.', 'They', 'were', 'built', 'by', 'Douglas', 'Aircraft', ',', 'nearly', '80', 'years', 'ago', ',', 'and', 'stand', 'today', 'as', 'monuments', 'to', 'one', 'of', 'the', 'greatest', 'achievements', 'of', 'cooperation', 'between', 'the', 'freedom-loving', 'people', 'of', 'Europe', 'and', 'those', 'of', 'the', 'United', 'States', '.', 'For', '11', 'months', ',', 'these', 'two', 'planes', ',', 'and', 'many', 'others', ',', 'took', 'off', 'and', 'landed', 'in', 'perpetual', 'motion', ',', 'delivering', '2.3', 'million', 'tons', 'of', 'food', ',', 'fuel', ',', 'and', 'other', 'essentials', 'to', 'the', 'people', 'of', 'Berlin', ',', 'who', 'were', 'surrounded', 'and', 'besieged', 'by', 'Soviet', 'forces', '.', 'The', 'commitment', 'and', 'ultimate', 'triumph', 'of', 'this', 'improbable', 'airlift', 'was', 'in', 'many', 'ways', 'the', 'beginning', 'of', 'an', 'alliance', 'that', 'has', 'included', 'ongoing', 'economic', 'cooperation', 'that', 'has', 'strengthened', 'both', 'our', 'democracies', '.', 'In', 'that', 'spirit', ',', 'I', 'am', 'certain', 'we', 'can', 'both', 'overcome', 'the', 'economic', 'challenges', 'that', 'lie', 'ahead', '.']
Out[72]:
['Thank', 'you', ',', 'Professor', 'Wieland', ',', 'for', 'the', 'introduction', ',']
In [ ]:
In [73]:
#Import required libraries :
from nltk.probability import FreqDist
#Find the frequency :
fdist = FreqDist(words)
#Print 10 most common words :
fdist.most_common(10)
Out[73]:
[('the', 273),
(',', 246),
('.', 171),
('of', 135),
('and', 122),
('to', 107),
('in', 87),
('a', 76),
('is', 68),
('that', 64)]
In [ ]:
In [74]:
#Plot the graph for fdist :
import matplotlib.pyplot as plt
fdist.plot(10)
In [ ]:
In [75]:
#Empty list to store words:
words_no_punc = []
#Removing punctuation marks :
for w in words:
if w.isalpha():
words_no_punc.append(w.lower())
#Print the words without punctution marks :
print (words_no_punc)
print ("\n")
#Length :
print (len(words_no_punc))
['thank', 'you', 'professor', 'wieland', 'for', 'the', 'introduction', 'and', 'thank', 'you', 'to', 'the', 'institute', 'for', 'monetary', 'and', 'financial', 'stability', 'for', 'the', 'opportunity', 'to', 'speak', 'to', 'you', 'i', 'come', 'here', 'at', 'a', 'moment', 'of', 'great', 'challenge', 'for', 'germany', 'and', 'europe', 'and', 'a', 'moment', 'in', 'which', 'it', 'has', 'never', 'been', 'more', 'evident', 'that', 'the', 'interests', 'of', 'europe', 'and', 'the', 'united', 'states', 'are', 'closely', 'aligned', 'america', 'stands', 'with', 'europe', 'in', 'defending', 'ukraine', 'because', 'we', 'all', 'understand', 'that', 'an', 'assault', 'on', 'democracy', 'in', 'europe', 'is', 'a', 'threat', 'to', 'democracy', 'everywhere', 'we', 'also', 'face', 'the', 'common', 'challenge', 'of', 'excessive', 'inflation', 'which', 'is', 'no', 'coincidence', 'since', 'germany', 'and', 'other', 'countries', 'are', 'dealing', 'with', 'many', 'of', 'the', 'same', 'forces', 'driving', 'up', 'inflation', 'in', 'the', 'united', 'states', 'fortunately', 'in', 'response', 'to', 'this', 'moment', 'of', 'common', 'challenges', 'and', 'interests', 'europe', 'and', 'the', 'united', 'states', 'have', 'strengthened', 'our', 'ties', 'and', 'i', 'believe', 'we', 'are', 'more', 'unified', 'today', 'than', 'we', 'have', 'been', 'for', 'decades', 'we', 'see', 'that', 'in', 'the', 'deepening', 'and', 'possible', 'broadening', 'of', 'our', 'security', 'commitments', 'and', 'we', 'also', 'see', 'it', 'in', 'the', 'strong', 'commitment', 'that', 'central', 'banks', 'in', 'europe', 'and', 'elsewhere', 'have', 'made', 'to', 'fight', 'inflation', 'in', 'today', 'distinguished', 'lecture', 'i', 'will', 'deal', 'with', 'two', 'distinct', 'topics', 'both', 'of', 'which', 'i', 'believe', 'will', 'be', 'of', 'interest', 'first', 'i', 'will', 'provide', 'my', 'outlook', 'for', 'the', 'economy', 'and', 'how', 'the', 'federal', 'reserve', 'plans', 'to', 'reduce', 'inflation', 'and', 'achieve', 'our', 'percent', 'target', 'then', 'i', 'will', 'pivot', 'to', 'a', 'more', 'academic', 'discussion', 'of', 'the', 'labor', 'market', 'and', 'the', 'possibility', 'of', 'a', 'soft', 'landing', 'in', 'which', 'taming', 'inflation', 'does', 'not', 'harm', 'employment', 'let', 'me', 'start', 'with', 'the', 'economic', 'outlook', 'for', 'the', 'united', 'states', 'despite', 'a', 'pause', 'early', 'this', 'year', 'in', 'the', 'growth', 'of', 'real', 'gross', 'domestic', 'product', 'gdp', 'the', 'economy', 'continues', 'to', 'power', 'along', 'at', 'a', 'healthy', 'pace', 'the', 'contraction', 'in', 'output', 'reported', 'in', 'the', 'first', 'quarter', 'was', 'due', 'to', 'swings', 'in', 'two', 'volatile', 'categories', 'inventories', 'and', 'net', 'exports', 'and', 'i', 'do', 'expect', 'them', 'to', 'be', 'repeated', 'consumer', 'spending', 'and', 'business', 'investment', 'which', 'are', 'the', 'bedrock', 'of', 'gdp', 'were', 'both', 'strong', 'and', 'more', 'recent', 'data', 'point', 'toward', 'solid', 'demand', 'and', 'continuing', 'momentum', 'in', 'the', 'economy', 'that', 'will', 'sustain', 'output', 'growth', 'in', 'the', 'months', 'ahead', 'another', 'sign', 'of', 'strength', 'is', 'the', 'labor', 'market', 'which', 'has', 'created', 'million', 'jobs', 'in', 'the', 'first', 'four', 'months', 'of', 'at', 'a', 'remarkably', 'steady', 'pace', 'that', 'is', 'down', 'only', 'slightly', 'from', 'the', 'a', 'month', 'last', 'year', 'unemployment', 'is', 'near', 'a', 'low', 'and', 'both', 'the', 'low', 'numbers', 'of', 'people', 'filing', 'for', 'unemployment', 'benefits', 'and', 'the', 'high', 'number', 'of', 'job', 'openings', 'indicate', 'that', 'the', 'slowdown', 'in', 'the', 'economy', 'from', 'the', 'fast', 'pace', 'of', 'last', 'year', 'is', 'yet', 'weighing', 'on', 'the', 'job', 'market', 'some', 'look', 'at', 'labor', 'force', 'participation', 'which', 'is', 'below', 'its', 'level', 'as', 'leaving', 'a', 'lot', 'of', 'room', 'for', 'improvement', 'however', 'there', 'are', 'underlying', 'factors', 'that', 'explain', 'why', 'participation', 'is', 'depressed', 'including', 'early', 'retirements', 'and', 'individual', 'choices', 'associated', 'with', 'covid', 'concerns', 'whatever', 'the', 'cause', 'low', 'participation', 'has', 'contributed', 'to', 'the', 'fact', 'that', 'there', 'are', 'two', 'job', 'vacancies', 'for', 'every', 'one', 'person', 'counted', 'looking', 'for', 'a', 'job', 'a', 'record', 'high', 'before', 'the', 'pandemic', 'when', 'the', 'labor', 'market', 'was', 'in', 'very', 'solid', 'shape', 'there', 'was', 'one', 'vacancy', 'for', 'every', 'two', 'unemployed', 'people', 'as', 'i', 'will', 'explain', 'this', 'very', 'tight', 'labor', 'market', 'has', 'implications', 'for', 'inflation', 'and', 'the', 'fed', 'plans', 'for', 'reducing', 'inflation', 'but', 'on', 'its', 'own', 'terms', 'we', 'need', 'to', 'recognize', 'that', 'robust', 'job', 'creation', 'is', 'an', 'underlying', 'strength', 'of', 'the', 'economy', 'which', 'is', 'expanding', 'its', 'productive', 'capacity', 'and', 'supporting', 'personal', 'income', 'and', 'ongoing', 'economic', 'growth', 'in', 'the', 'face', 'of', 'other', 'challenges', 'let', 'me', 'turn', 'now', 'to', 'the', 'outlook', 'for', 'the', 'fed', 'top', 'priority', 'inflation', 'i', 'said', 'in', 'december', 'that', 'inflation', 'was', 'alarmingly', 'high', 'and', 'it', 'has', 'remained', 'so', 'the', 'april', 'consumer', 'price', 'index', 'cpi', 'was', 'up', 'percent', 'year', 'over', 'year', 'this', 'headline', 'number', 'was', 'a', 'slight', 'decline', 'from', 'percent', 'in', 'march', 'but', 'primarily', 'due', 'to', 'a', 'drop', 'in', 'volatile', 'gasoline', 'prices', 'that', 'we', 'know', 'surged', 'again', 'this', 'month', 'core', 'inflation', 'which', 'strips', 'out', 'volatile', 'food', 'and', 'energy', 'prices', 'was', 'also', 'down', 'slightly', 'to', 'percent', 'in', 'april', 'from', 'percent', 'the', 'month', 'before', 'but', 'the', 'percent', 'monthly', 'increase', 'from', 'march', 'was', 'an', 'acceleration', 'from', 'the', 'february', 'to', 'march', 'rate', 'and', 'still', 'too', 'high', 'meanwhile', 'the', 'fed', 'preferred', 'measure', 'based', 'on', 'personal', 'consumption', 'expenditures', 'pce', 'recorded', 'headline', 'inflation', 'of', 'percent', 'and', 'core', 'of', 'percent', 'these', 'lower', 'readings', 'relative', 'to', 'cpi', 'reflect', 'differences', 'in', 'the', 'weights', 'of', 'various', 'categories', 'across', 'these', 'indexes', 'no', 'matter', 'which', 'measure', 'is', 'considered', 'however', 'headline', 'inflation', 'has', 'come', 'in', 'above', 'percent', 'for', 'about', 'a', 'year', 'and', 'core', 'inflation', 'is', 'not', 'coming', 'down', 'enough', 'to', 'meet', 'the', 'fed', 'target', 'anytime', 'soon', 'inflation', 'this', 'high', 'affects', 'everyone', 'but', 'is', 'especially', 'painful', 'for', 'and', 'households', 'that', 'spend', 'a', 'large', 'share', 'of', 'their', 'income', 'on', 'shelter', 'groceries', 'gasoline', 'and', 'other', 'necessities', 'it', 'is', 'the', 'fomc', 'job', 'to', 'meet', 'our', 'price', 'stability', 'mandate', 'and', 'get', 'inflation', 'down', 'and', 'we', 'are', 'determined', 'to', 'do', 'so', 'the', 'forces', 'driving', 'inflation', 'today', 'are', 'the', 'same', 'ones', 'that', 'emerged', 'a', 'year', 'ago', 'the', 'combination', 'of', 'strong', 'consumer', 'demand', 'and', 'supply', 'bottlenecks', 'and', 'a', 'shortage', 'of', 'workers', 'relative', 'to', 'labor', 'generating', 'very', 'high', 'inflation', 'we', 'can', 'argue', 'about', 'whether', 'supply', 'or', 'demand', 'is', 'a', 'greater', 'factor', 'but', 'the', 'details', 'have', 'no', 'bearing', 'on', 'the', 'fact', 'that', 'we', 'are', 'not', 'meeting', 'the', 'fomc', 'price', 'stability', 'mandate', 'what', 'i', 'care', 'about', 'is', 'getting', 'inflation', 'down', 'so', 'that', 'we', 'avoid', 'a', 'lasting', 'escalation', 'in', 'the', 'public', 'expectations', 'of', 'future', 'inflation', 'once', 'inflation', 'expectations', 'become', 'unanchored', 'in', 'this', 'way', 'it', 'is', 'very', 'difficult', 'and', 'economically', 'painful', 'to', 'lower', 'them', 'while', 'it', 'is', 'not', 'surprising', 'that', 'inflation', 'expectations', 'for', 'the', 'next', 'year', 'are', 'up', 'since', 'current', 'inflation', 'is', 'high', 'what', 'i', 'focus', 'on', 'is', 'inflation', 'expectations', 'recent', 'data', 'that', 'try', 'to', 'measure', 'expectations', 'are', 'mixed', 'overall', 'my', 'assessment', 'is', 'that', 'inflation', 'expectations', 'have', 'moved', 'up', 'from', 'a', 'level', 'that', 'was', 'consistent', 'with', 'trend', 'inflation', 'below', 'percent', 'to', 'a', 'level', 'that', 'consistent', 'with', 'underlying', 'inflation', 'a', 'little', 'above', 'percent', 'i', 'will', 'be', 'watching', 'that', 'these', 'expectations', 'do', 'not', 'continue', 'to', 'rise', 'because', 'inflation', 'expectations', 'influence', 'near', 'term', 'inflation', 'as', 'well', 'as', 'our', 'ability', 'to', 'achieve', 'our', 'percent', 'target', 'when', 'they', 'are', 'anchored', 'they', 'influence', 'spending', 'decisions', 'today', 'in', 'a', 'way', 'that', 'helps', 'inflation', 'move', 'toward', 'our', 'target', 'to', 'ensure', 'these', 'expectations', 'do', 'not', 'move', 'up', 'broadly', 'the', 'federal', 'reserve', 'has', 'tools', 'to', 'reduce', 'demand', 'which', 'should', 'ease', 'inflation', 'pressures', 'and', 'over', 'time', 'supply', 'constraints', 'will', 'resolve', 'to', 'help', 'rein', 'in', 'price', 'increases', 'as', 'well', 'although', 'we', 'do', 'know', 'how', 'soon', 'i', 'can', 'not', 'emphasize', 'enough', 'that', 'my', 'fomc', 'colleagues', 'and', 'i', 'are', 'united', 'in', 'our', 'commitment', 'to', 'do', 'what', 'it', 'takes', 'to', 'bring', 'inflation', 'down', 'and', 'achieve', 'the', 'fed', 'percent', 'target', 'since', 'the', 'start', 'of', 'this', 'year', 'the', 'fomc', 'has', 'raised', 'the', 'target', 'range', 'for', 'the', 'federal', 'funds', 'rate', 'by', 'basis', 'points', 'with', 'basis', 'points', 'of', 'that', 'increase', 'coming', 'at', 'our', 'meeting', 'earlier', 'this', 'month', 'we', 'also', 'issued', 'forward', 'guidance', 'about', 'the', 'likely', 'path', 'of', 'policy', 'the', 'may', 'fomc', 'statement', 'said', 'the', 'committee', 'anticipates', 'that', 'ongoing', 'increases', 'in', 'the', 'target', 'range', 'will', 'be', 'appropriate', 'i', 'support', 'tightening', 'policy', 'by', 'another', 'basis', 'points', 'for', 'several', 'meetings', 'in', 'particular', 'i', 'am', 'not', 'taking', 'hikes', 'off', 'the', 'table', 'until', 'i', 'see', 'inflation', 'coming', 'down', 'closer', 'to', 'our', 'percent', 'target', 'and', 'by', 'the', 'end', 'of', 'this', 'year', 'i', 'support', 'having', 'the', 'policy', 'rate', 'at', 'a', 'level', 'above', 'neutral', 'so', 'that', 'it', 'is', 'reducing', 'demand', 'for', 'products', 'and', 'labor', 'bringing', 'it', 'more', 'in', 'line', 'with', 'supply', 'and', 'thus', 'helping', 'rein', 'in', 'inflation', 'this', 'is', 'my', 'projection', 'today', 'given', 'where', 'we', 'stand', 'and', 'how', 'i', 'expect', 'the', 'economy', 'to', 'evolve', 'of', 'course', 'my', 'future', 'decisions', 'will', 'depend', 'on', 'incoming', 'data', 'in', 'the', 'next', 'couple', 'of', 'weeks', 'for', 'example', 'the', 'may', 'employment', 'and', 'cpi', 'reports', 'will', 'be', 'released', 'those', 'are', 'two', 'key', 'pieces', 'of', 'data', 'i', 'will', 'be', 'watching', 'to', 'get', 'information', 'about', 'the', 'continuing', 'strength', 'of', 'the', 'labor', 'market', 'and', 'about', 'the', 'momentum', 'in', 'price', 'increases', 'over', 'a', 'longer', 'period', 'we', 'will', 'learn', 'more', 'about', 'how', 'monetary', 'policy', 'is', 'affecting', 'demand', 'and', 'how', 'supply', 'constraints', 'are', 'evolving', 'if', 'the', 'data', 'suggest', 'that', 'inflation', 'is', 'stubbornly', 'high', 'i', 'am', 'prepared', 'to', 'do', 'more', 'my', 'plan', 'for', 'rate', 'hikes', 'is', 'roughly', 'in', 'line', 'with', 'the', 'expectations', 'of', 'financial', 'markets', 'as', 'seen', 'in', 'slide', 'federal', 'funds', 'futures', 'are', 'pricing', 'in', 'roughly', 'basis', 'point', 'hikes', 'at', 'the', 'fomc', 'next', 'two', 'meetings', 'and', 'expecting', 'the', 'policy', 'rate', 'to', 'be', 'around', 'percent', 'so', 'in', 'total', 'markets', 'expect', 'about', 'percentage', 'points', 'of', 'tightening', 'this', 'year', 'this', 'expectation', 'represents', 'a', 'significant', 'degree', 'of', 'policy', 'tightening', 'consistent', 'with', 'the', 'fomc', 'commitment', 'to', 'get', 'inflation', 'back', 'under', 'control', 'and', 'if', 'we', 'need', 'to', 'do', 'more', 'we', 'will', 'these', 'current', 'and', 'anticipated', 'policy', 'actions', 'have', 'already', 'resulted', 'in', 'a', 'significant', 'tightening', 'of', 'financial', 'conditions', 'the', 'benchmark', 'treasury', 'security', 'began', 'the', 'year', 'at', 'a', 'yield', 'of', 'around', 'percent', 'and', 'has', 'risen', 'to', 'around', 'percent', 'rates', 'for', 'home', 'mortgages', 'are', 'up', 'basis', 'points', 'and', 'other', 'credit', 'financing', 'costs', 'have', 'followed', 'suit', 'higher', 'rates', 'make', 'it', 'more', 'expensive', 'to', 'finance', 'spending', 'and', 'investment', 'which', 'should', 'help', 'reduce', 'demand', 'and', 'contribute', 'to', 'lower', 'inflation', 'in', 'addition', 'to', 'raising', 'rates', 'the', 'fomc', 'further', 'tightened', 'monetary', 'policy', 'by', 'ending', 'asset', 'purchases', 'in', 'march', 'and', 'then', 'agreeing', 'to', 'start', 'reducing', 'our', 'holdings', 'of', 'securities', 'a', 'process', 'that', 'begins', 'june', 'by', 'allowing', 'securities', 'to', 'mature', 'without', 'reinvesting', 'them', 'the', 'fed', 'balance', 'sheet', 'will', 'shrink', 'we', 'will', 'phase', 'in', 'the', 'amount', 'of', 'redemptions', 'over', 'three', 'months', 'by', 'september', 'we', 'anticipate', 'having', 'up', 'to', 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'as', 'signaling', 'that', 'it', 'will', 'likely', 'start', 'raising', 'its', 'policy', 'rate', 'this', 'summer', 'and', 'that', 'it', 'could', 'raise', 'rates', 'a', 'few', 'times', 'before', 'policy', 'tightening', 'started', 'last', 'year', 'as', 'emerging', 'markets', 'including', 'mexico', 'and', 'brazil', 'increased', 'rates', 'substantially', 'amid', 'expectations', 'of', 'accelerating', 'inflation', 'several', 'central', 'banks', 'including', 'the', 'bank', 'of', 'england', 'began', 'raising', 'interest', 'rates', 'in', 'the', 'second', 'half', 'of', 'last', 'year', 'like', 'the', 'fed', 'the', 'bank', 'of', 'canada', 'lifted', 'off', 'in', 'march', 'and', 'also', 'like', 'the', 'fed', 'picked', 'up', 'the', 'pace', 'of', 'tightening', 'with', 'a', 'rate', 'hike', 'of', 'basis', 'points', 'at', 'its', 'most', 'recent', 'meeting', 'central', 'banks', 'in', 'australia', 'and', 'sweden', 'pivoted', 'sharply', 'to', 'hike', 'rates', 'at', 'their', 'most', 'recent', 'meetings', 'after', 'previously', 'saying', 'that', 'such', 'moves', 'were', 'not', 'likely', 'anytime', 'soon', 'slide', 'shows', 'the', 'similarly', 'timed', 'policy', 'responses', 'across', 'advanced', 'and', 'emerging', 'economy', 'central', 'banks', 'in', 'terms', 'of', 'actual', 'and', 'anticipated', 'increases', 'in', 'their', 'policy', 'rates', 'emerging', 'market', 'economies', 'started', 'the', 'year', 'with', 'a', 'policy', 'rate', 'that', 'averaged', 'around', 'percent', 'and', 'they', 'are', 'expected', 'to', 'end', 'the', 'year', 'averaging', 'a', 'bit', 'over', 'percent', 'advanced', 'foreign', 'economies', 'started', 'a', 'bit', 'below', 'zero', 'and', 'at', 'this', 'point', 'are', 'expected', 'to', 'move', 'up', 'on', 'average', 'by', 'around', 'percentage', 'point', 'this', 'worldwide', 'increase', 'in', 'policy', 'rates', 'unfortunately', 'reflects', 'the', 'fact', 'that', 'inflation', 'is', 'a', 'global', 'problem', 'which', 'central', 'banks', 'around', 'the', 'world', 'recognize', 'must', 'be', 'addressed', 'finally', 'like', 'the', 'fed', 'many', 'other', 'central', 'banks', 'that', 'expanded', 'their', 'balance', 'sheets', 'over', 'the', 'past', 'two', 'years', 'are', 'now', 'reversing', 'course', 'in', 'recent', 'months', 'as', 'shown', 'in', 'slide', 'the', 'bank', 'of', 'canada', 'and', 'bank', 'of', 'england', 'have', 'begun', 'to', 'shrink', 'their', 'balance', 'sheets', 'by', 'stopping', 'full', 'reinvestment', 'of', 'maturing', 'assets', 'similar', 'to', 'what', 'the', 'fed', 'will', 'commence', 'in', 'june', 'although', 'the', 'ecb', 'has', 'committed', 'to', 'reinvesting', 'maturing', 'assets', 'for', 'quite', 'some', 'time', 'it', 'has', 'tapered', 'net', 'purchases', 'substantially', 'since', 'last', 'year', 'and', 'has', 'indicated', 'it', 'will', 'likely', 'end', 'those', 'purchases', 'early', 'in', 'the', 'third', 'quarter', 'some', 'have', 'expressed', 'concern', 'that', 'the', 'fed', 'can', 'not', 'raise', 'interest', 'rates', 'to', 'arrest', 'inflation', 'while', 'also', 'avoiding', 'a', 'sharp', 'slowdown', 'in', 'economic', 'growth', 'and', 'significant', 'damage', 'to', 'the', 'labor', 'market', 'one', 'argument', 'in', 'this', 'regard', 'warns', 'that', 'policy', 'tightening', 'will', 'reduce', 'the', 'current', 'high', 'level', 'of', 'job', 'vacancies', 'and', 'push', 'up', 'unemployment', 'substantially', 'based', 'on', 'the', 'historical', 'relationship', 'between', 'these', 'two', 'pieces', 'of', 'data', 'which', 'is', 'depicted', 'by', 'something', 'called', 'the', 'beveridge', 'curve', 'because', 'i', 'am', 'now', 'among', 'fellow', 'students', 'of', 'economics', 'i', 'wanted', 'to', 'take', 'a', 'moment', 'to', 'show', 'why', 'this', 'statement', 'may', 'not', 'be', 'correct', 'in', 'current', 'circumstances', 'first', 'a', 'little', 'background', 'the', 'relationship', 'between', 'vacancies', 'and', 'the', 'unemployment', 'rate', 'is', 'shown', 'in', 'slide', 'the', 'blue', 'dots', 'in', 'the', 'figure', 'show', 'observations', 'of', 'the', 'vacancy', 'rate', 'and', 'the', 'unemployment', 'rate', 'between', 'and', 'the', 'black', 'curve', 'is', 'the', 'fitted', 'relationship', 'between', 'the', 'log', 'of', 'vacancies', 'and', 'the', 'log', 'of', 'unemployment', 'over', 'this', 'period', 'it', 'has', 'a', 'somewhat', 'flat', 'downward', 'slope', 'from', 'this', 'the', 'argument', 'goes', 'policy', 'to', 'slow', 'demand', 'and', 'push', 'down', 'vacancies', 'requires', 'moving', 'along', 'this', 'curve', 'and', 'increasing', 'the', 'unemployment', 'rate', 'substantially', 'but', 'there', 'another', 'perspective', 'about', 'what', 'a', 'reduction', 'in', 'vacancies', 'implies', 'for', 'unemployment', 'that', 'is', 'just', 'as', 'plausible', 'if', 'not', 'more', 'so', 'slide', 'shows', 'the', 'same', 'observations', 'as', 'slide', 'but', 'also', 'adds', 'observations', 'from', 'the', 'pandemic', 'the', 'two', 'larger', 'red', 'dots', 'show', 'the', 'most', 'recent', 'observation', 'march', 'and', 'january', 'when', 'the', 'vacancy', 'rate', 'had', 'achieved', 'its', 'highest', 'rate', 'before', 'the', 'pandemic', 'these', 'two', 'dots', 'suggest', 'that', 'the', 'vacancy', 'rate', 'can', 'be', 'reduced', 'substantially', 'from', 'the', 'current', 'level', 'to', 'the', 'january', 'level', 'while', 'still', 'leaving', 'the', 'level', 'of', 'vacancies', 'consistent', 'with', 'a', 'strong', 'labor', 'market', 'and', 'with', 'a', 'low', 'level', 'of', 'unemployment', 'such', 'as', 'we', 'had', 'in', 'to', 'see', 'why', 'this', 'is', 'a', 'plausible', 'outcome', 'i', 'first', 'need', 'to', 'digress', 'a', 'bit', 'to', 'discuss', 'the', 'important', 'determinants', 'of', 'unemployment', 'many', 'factors', 'influence', 'the', 'unemployment', 'rate', 'and', 'vacancies', 'are', 'just', 'one', 'thus', 'to', 'understand', 'how', 'a', 'lower', 'vacancy', 'rate', 'would', 'influence', 'unemployment', 'going', 'forward', 'we', 'need', 'to', 'separate', 'the', 'direct', 'effect', 'of', 'vacancies', 'on', 'the', 'unemployment', 'rate', 'from', 'other', 'factors', 'to', 'do', 'that', 'we', 'first', 'need', 'to', 'review', 'the', 'factors', 'that', 'account', 'for', 'unemployment', 'movements', 'there', 'are', 'two', 'broad', 'determinants', 'of', 'unemployment', 'separations', 'from', 'employment', 'including', 'layoffs', 'and', 'quits', 'which', 'raise', 'unemployment', 'and', 'job', 'finding', 'by', 'the', 'unemployed', 'which', 'lowers', 'separations', 'consist', 'largely', 'of', 'layoffs', 'which', 'are', 'typically', 'cyclical', 'surging', 'in', 'recessions', 'and', 'falling', 'during', 'booms', 'job', 'finding', 'is', 'also', 'highly', 'cyclical', 'rising', 'as', 'the', 'labor', 'market', 'tightens', 'and', 'falling', 'in', 'recessions', 'to', 'see', 'how', 'separations', 'and', 'job', 'finding', 'affect', 'the', 'unemployment', 'rate', 'it', 'helpful', 'to', 'start', 'with', 'equation', 'on', 'slide', 'which', 'states', 'that', 'in', 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'convenience', 'i', 'assuming', 'a', 'mathematical', 'representation', 'of', 'this', 'matching', 'function', 'takes', 'a', 'form', 'if', 'we', 'divide', 'both', 'sides', 'of', 'equation', 'by', 'unemployment', 'we', 'get', 'equation', 'which', 'expresses', 'the', 'rate', 'as', 'a', 'function', 'of', 'the', 'ratio', 'of', 'vacancies', 'to', 'unemployment', 'or', 'labor', 'market', 'tightness', 'because', 'we', 'have', 'data', 'for', 'both', 'the', 'left', 'and', 'right', 'sides', 'of', 'equation', 'we', 'can', 'estimate', 'it', 'and', 'obtain', 'parameter', 'values', 'for', 'the', 'elasticity', 'of', 'job', 'finding', 'with', 'respect', 'to', 'labor', 'market', 'tightness', 'sigma', 'and', 'matching', 'efficiency', 'matching', 'efficiency', 'represents', 'factors', 'that', 'can', 'increase', 'or', 'decrease', 'job', 'findings', 'without', 'changes', 'in', 'labor', 'market', 'tightness', 'on', 'the', 'one', 'hand', 'if', 'the', 'workers', 'searching', 'for', 'jobs', 'are', 'well', 'suited', 'for', 'the', 'jobs', 'that', 'are', 'available', 'matching', 'efficiency', 'will', 'be', 'high', 'on', 'the', 'other', 'hand', 'if', 'many', 'searching', 'workers', 'are', 'not', 'well', 'suited', 'for', 'the', 'available', 'jobs', 'matching', 'efficiency', 'will', 'be', 'the', 'last', 'step', 'is', 'to', 'plug', 'our', 'expression', 'for', 'job', 'finding', 'into', 'equation', 'the', 'unemployment', 'rate', 'yielding', 'equation', 'equation', 'shows', 'how', 'vacancies', 'affect', 'the', 'unemployment', 'rate', 'to', 'illustrate', 'this', 'relationship', 'i', 'solve', 'equation', 'for', 'different', 'values', 'of', 'v', 'and', 's', 'holding', 'the', 'matching', 'efficiency', 'parameters', 'constant', 'that', 'is', 'i', 'pick', 'a', 'separation', 'rate', 'at', 'some', 'level', 'and', 'trace', 'out', 'what', 'happens', 'to', 'the', 'unemployment', 'rate', 'as', 'the', 'vacancy', 'rate', 'changes', 'then', 'i', 'pick', 'a', 'different', 'separation', 'rate', 'and', 'again', 'trace', 'out', 'the', 'effect', 'of', 'vacancies', 'on', 'unemployment', 'the', 'result', 'is', 'shown', 'on', 'slide', 'which', 'plots', 'four', 'curves', 'showing', 'the', 'effect', 'of', 'vacancies', 'on', 'unemployment', 'for', 'four', 'different', 'separation', 'rates', 'each', 'curve', 'is', 'convex', 'as', 'the', 'number', 'of', 'vacancies', 'increases', 'relative', 'to', 'the', 'number', 'of', 'individuals', 'looking', 'for', 'work', 'it', 'becomes', 'harder', 'for', 'firms', 'to', 'fill', 'jobs', 'with', 'suitable', 'workers', 'and', 'more', 'jobs', 'remain', 'vacant', 'this', 'is', 'exactly', 'the', 'situation', 'many', 'employers', 'are', 'now', 'experiencing', 'because', 'more', 'vacancies', 'generate', 'fewer', 'and', 'fewer', 'hires', 'they', 'result', 'in', 'smaller', 'and', 'smaller', 'reductions', 'in', 'unemployment', 'but', 'large', 'numbers', 'of', 'vacancies', 'are', 'of', 'course', 'a', 'hallmark', 'of', 'tight', 'labor', 'markets', 'and', 'additional', 'vacancies', 'continue', 'to', 'strongly', 'boost', 'wage', 'growth', 'and', 'quits', 'the', 'curve', 'farthest', 'to', 'the', 'right', 'labeled', 'represents', 'a', 'situation', 'when', 'the', 'separations', 'rate', 'is', 'percent', 'a', 'historically', 'high', 'level', 'this', 'rate', 'is', 'approximately', 'the', 'level', 'seen', 'in', 'the', 'middle', 'of', 'just', 'after', 'the', 'onset', 'of', 'the', 'pandemic', 'you', 'can', 'see', 'that', 'when', 'the', 'separations', 'rate', 'is', 'this', 'high', 'the', 'unemployment', 'rate', 'is', 'also', 'going', 'to', 'be', 'high', 'no', 'matter', 'the', 'level', 'of', 'vacancies', 'now', 'let', 'think', 'about', 'what', 'happens', 'as', 'the', 'economy', 'recovers', 'as', 'it', 'has', 'over', 'the', 'past', 'two', 'years', 'in', 'an', 'expansion', 'layoffs', 'fall', 'pushing', 'down', 'separations', 'and', 'moving', 'the', 'curve', 'to', 'the', 'left', 'at', 'the', 'same', 'time', 'greater', 'labor', 'demand', 'increases', 'vacancies', 'causing', 'the', 'labor', 'market', 'to', 'move', 'up', 'the', 'steep', 'curves', 'the', 'combination', 'of', 'these', 'movements', 'is', 'shown', 'in', 'slide', 'as', 'the', 'black', 'fitted', 'curve', 'which', 'i', 'reproduced', 'from', 'slide', 'as', 'you', 'recall', 'the', 'black', 'curve', 'fits', 'the', 'actual', 'observations', 'on', 'unemployment', 'and', 'vacancies', 'we', 'saw', 'before', 'the', 'pandemic', 'and', 'we', 'now', 'can', 'see', 'that', 'these', 'observations', 'are', 'produced', 'by', 'a', 'combination', 'of', 'changes', 'in', 'vacancies', 'and', 'separations', 'as', 'well', 'as', 'other', 'influences', 'on', 'unemployment', 'decreases', 'in', 'the', 'separations', 'rate', 'reduce', 'the', 'unemployment', 'rate', 'without', 'changing', 'vacancies', 'imparting', 'a', 'flatness', 'to', 'the', 'fitted', 'curve', 'relative', 'to', 'the', 'steeper', 'curves', 'that', 'only', 'reflect', 'the', 'effect', 'of', 'vacancies', 'if', 'we', 'want', 'to', 'just', 'focus', 'on', 'the', 'effect', 'of', 'vacancies', 'then', 'we', 'should', 'be', 'looking', 'at', 'the', 'steep', 'curves', 'especially', 'when', 'the', 'labor', 'market', 'is', 'tight', 'as', 'it', 'is', 'now', 'what', 'does', 'all', 'this', 'suggest', 'about', 'what', 'will', 'happen', 'to', 'the', 'labor', 'market', 'when', 'as', 'i', 'expect', 'a', 'tightening', 'of', 'financial', 'conditions', 'and', 'fading', 'fiscal', 'stimulus', 'start', 'to', 'cool', 'labor', 'demand', 'slide', 'focuses', 'on', 'the', 'beveridge', 'curve', 'the', 'relationship', 'produced', 'by', 'the', 'direct', 'effect', 'of', 'changes', 'in', 'vacancies', 'on', 'unemployment', 'when', 'the', 'separations', 'rate', 'is', 'low', 'as', 'it', 'is', 'the', 'march', 'observation', 'lies', 'at', 'the', 'top', 'of', 'the', 'curve', 'and', 'is', 'labeled', 'point', 'a', 'if', 'there', 'is', 'cooling', 'in', 'aggregate', 'demand', 'spurred', 'by', 'monetary', 'policy', 'tightening', 'that', 'tempers', 'labor', 'demand', 'then', 'vacancies', 'should', 'fall', 'substantially', 'suppose', 'they', 'decrease', 'from', 'the', 'current', 'level', 'of', 'percent', 'to', 'percent', 'the', 'rate', 'prevailing', 'in', 'january', 'when', 'the', 'labor', 'market', 'was', 'still', 'quite', 'strong', 'then', 'we', 'should', 'travel', 'down', 'the', 'curve', 'from', 'point', 'a', 'to', 'point', 'the', 'unemployment', 'rate', 'will', 'increase', 'but', 'only', 'somewhat', 'because', 'labor', 'demand', 'is', 'still', 'not', 'as', 'because', 'when', 'the', 'labor', 'market', 'is', 'very', 'tight', 'as', 'it', 'is', 'now', 'vacancies', 'generate', 'relatively', 'few', 'hires', 'indeed', 'hires', 'per', 'vacancy', 'are', 'currently', 'at', 'historically', 'low', 'levels', 'thus', 'reducing', 'vacancies', 'from', 'an', 'extremely', 'high', 'level', 'to', 'a', 'lower', 'but', 'still', 'strong', 'level', 'has', 'a', 'relatively', 'limited', 'effect', 'on', 'hiring', 'and', 'on', 'unemployment', 'now', 'i', 'also', 'show', 'the', 'january', 'observation', 'of', 'vacancies', 'and', 'unemployment', 'recall', 'this', 'is', 'also', 'where', 'the', 'economy', 'was', 'over', 'the', 'year', 'prior', 'to', 'the', 'pandemic', 'as', 'you', 'can', 'see', 'moving', 'from', 'the', 'march', 'observation', 'to', 'the', 'january', 'observation', 'is', 'not', 'that', 'different', 'from', 'the', 'change', 'in', 'the', 'unemployment', 'rate', 'predicted', 'by', 'my', 'estimated', 'beveridge', 'curve', 'which', 'suggests', 'the', 'predicted', 'small', 'increase', 'in', 'unemployment', 'is', 'a', 'plausible', 'outcome', 'to', 'policy', 'tightening', 'if', 'labor', 'demand', 'cools', 'will', 'separations', 'increase', 'and', 'shift', 'the', 'curve', 'outward', 'increasing', 'unemployment', 'further', 'i', 'do', 'think', 'so', 'as', 'shown', 'on', 'slide', 'outside', 'of', 'recessions', 'layoffs', 'do', 'change', 'much', 'instead', 'changes', 'in', 'labor', 'demand', 'appear', 'to', 'be', 'reflected', 'primarily', 'in', 'changes', 'in', 'vacancies', 'now', 'it', 'certainly', 'possible', 'even', 'probable', 'that', 'influences', 'on', 'the', 'unemployment', 'rate', 'other', 'than', 'vacancies', 'will', 'change', 'going', 'forward', 'in', 'terms', 'of', 'the', 'equations', 'we', 'have', 'been', 'discussing', 'layoffs', 'could', 'increase', 'somewhat', 'instead', 'of', 'staying', 'constant', 'matching', 'efficiency', 'could', 'also', 'improve', 'or', 'deteriorate', 'the', 'vacancy', 'rate', 'could', 'also', 'change', 'more', 'or', 'less', 'than', 'i', 'have', 'assumed', 'thus', 'i', 'not', 'arguing', 'that', 'the', 'unemployment', 'rate', 'will', 'end', 'up', 'exactly', 'as', 'the', 'beveridge', 'curve', 'i', 'drawn', 'suggests', 'but', 'i', 'do', 'think', 'it', 'quite', 'plausible', 'that', 'the', 'unemployment', 'rate', 'will', 'end', 'up', 'in', 'the', 'vicinity', 'of', 'what', 'the', 'beveridge', 'curve', 'currently', 'predicts', 'another', 'consideration', 'is', 'that', 'dynamics', 'could', 'take', 'hold', 'if', 'the', 'unemployment', 'rate', 'increases', 'by', 'a', 'certain', 'amount', 'as', 'suggested', 'by', 'the', 'sahm', 'rule', 'which', 'holds', 'that', 'recessions', 'have', 'in', 'the', 'past', 'occurred', 'whenever', 'the', 'moving', 'average', 'of', 'the', 'unemployment', 'rate', 'rises', 'percentage', 'point', 'over', 'its', 'minimum', 'rate', 'over', 'the', 'previous', 'we', 'certainly', 'need', 'to', 'be', 'alert', 'to', 'this', 'possibility', 'but', 'the', 'past', 'is', 'not', 'always', 'prescriptive', 'of', 'the', 'future', 'the', 'current', 'situation', 'is', 'unique', 'we', 'never', 'seen', 'a', 'vacancy', 'rate', 'of', 'percent', 'before', 'reducing', 'the', 'vacancy', 'rate', 'by', 'percentage', 'points', 'would', 'still', 'leave', 'it', 'at', 'a', 'level', 'seen', 'at', 'the', 'end', 'of', 'the', 'last', 'expansion', 'whereas', 'in', 'previous', 'expansions', 'a', 'reduction', 'of', 'percent', 'would', 'have', 'left', 'vacancies', 'at', 'or', 'below', 'percent', 'a', 'level', 'only', 'seen', 'in', 'extremely', 'weak', 'labor', 'markets', 'to', 'sum', 'up', 'the', 'relationship', 'between', 'vacancies', 'and', 'unemployment', 'gives', 'me', 'reason', 'to', 'hope', 'that', 'policy', 'tightening', 'in', 'current', 'circumstances', 'can', 'tame', 'inflation', 'without', 'causing', 'a', 'sharp', 'increase', 'in', 'unemployment', 'of', 'course', 'the', 'path', 'of', 'the', 'economy', 'depends', 'on', 'many', 'factors', 'including', 'how', 'the', 'ukraine', 'war', 'and', 'evolve', 'from', 'this', 'discussion', 'i', 'am', 'left', 'optimistic', 'that', 'the', 'strong', 'labor', 'market', 'can', 'handle', 'higher', 'rates', 'without', 'a', 'significant', 'increase', 'in', 'unemployment', 'in', 'closing', 'i', 'want', 'to', 'again', 'thank', 'the', 'institute', 'for', 'the', 'invitation', 'to', 'address', 'you', 'today', 'at', 'a', 'time', 'of', 'considerable', 'challenge', 'for', 'germany', 'and', 'the', 'united', 'states', 'it', 'not', 'the', 'first', 'time', 'we', 'have', 'faced', 'such', 'moments', 'together', 'just', 'south', 'of', 'the', 'frankfurt', 'airport', 'is', 'a', 'surprising', 'couple', 'of', 'antique', 'military', 'cargo', 'planes', 'parked', 'on', 'the', 'side', 'of', 'the', 'autobahn', 'they', 'were', 'built', 'by', 'douglas', 'aircraft', 'nearly', 'years', 'ago', 'and', 'stand', 'today', 'as', 'monuments', 'to', 'one', 'of', 'the', 'greatest', 'achievements', 'of', 'cooperation', 'between', 'the', 'people', 'of', 'europe', 'and', 'those', 'of', 'the', 'united', 'states', 'for', 'months', 'these', 'two', 'planes', 'and', 'many', 'others', 'took', 'off', 'and', 'landed', 'in', 'perpetual', 'motion', 'delivering', 'million', 'tons', 'of', 'food', 'fuel', 'and', 'other', 'essentials', 'to', 'the', 'people', 'of', 'berlin', 'who', 'were', 'surrounded', 'and', 'besieged', 'by', 'soviet', 'forces', 'the', 'commitment', 'and', 'ultimate', 'triumph', 'of', 'this', 'improbable', 'airlift', 'was', 'in', 'many', 'ways', 'the', 'beginning', 'of', 'an', 'alliance', 'that', 'has', 'included', 'ongoing', 'economic', 'cooperation', 'that', 'has', 'strengthened', 'both', 'our', 'democracies', 'in', 'that', 'spirit', 'i', 'am', 'certain', 'we', 'can', 'both', 'overcome', 'the', 'economic', 'challenges', 'that', 'lie', 'ahead'] 4160
In [76]:
#Frequency distribution :
fdist = FreqDist(words_no_punc)
fdist.most_common(10)
Out[76]:
[('the', 294),
('of', 137),
('and', 125),
('to', 114),
('in', 97),
('a', 78),
('is', 68),
('that', 65),
('unemployment', 57),
('rate', 56)]
In [77]:
#Plot the most common words on grpah:
fdist.plot(10)
In [78]:
from nltk.corpus import stopwords
#List of stopwords
stopwords = stopwords.words("english")
print(stopwords)
['i', 'me', 'my', 'myself', 'we', 'our', 'ours', 'ourselves', 'you', "you're", "you've", "you'll", "you'd", 'your', 'yours', 'yourself', 'yourselves', 'he', 'him', 'his', 'himself', 'she', "she's", 'her', 'hers', 'herself', 'it', "it's", 'its', 'itself', 'they', 'them', 'their', 'theirs', 'themselves', 'what', 'which', 'who', 'whom', 'this', 'that', "that'll", 'these', 'those', 'am', 'is', 'are', 'was', 'were', 'be', 'been', 'being', 'have', 'has', 'had', 'having', 'do', 'does', 'did', 'doing', 'a', 'an', 'the', 'and', 'but', 'if', 'or', 'because', 'as', 'until', 'while', 'of', 'at', 'by', 'for', 'with', 'about', 'against', 'between', 'into', 'through', 'during', 'before', 'after', 'above', 'below', 'to', 'from', 'up', 'down', 'in', 'out', 'on', 'off', 'over', 'under', 'again', 'further', 'then', 'once', 'here', 'there', 'when', 'where', 'why', 'how', 'all', 'any', 'both', 'each', 'few', 'more', 'most', 'other', 'some', 'such', 'no', 'nor', 'not', 'only', 'own', 'same', 'so', 'than', 'too', 'very', 's', 't', 'can', 'will', 'just', 'don', "don't", 'should', "should've", 'now', 'd', 'll', 'm', 'o', 're', 've', 'y', 'ain', 'aren', "aren't", 'couldn', "couldn't", 'didn', "didn't", 'doesn', "doesn't", 'hadn', "hadn't", 'hasn', "hasn't", 'haven', "haven't", 'isn', "isn't", 'ma', 'mightn', "mightn't", 'mustn', "mustn't", 'needn', "needn't", 'shan', "shan't", 'shouldn', "shouldn't", 'wasn', "wasn't", 'weren', "weren't", 'won', "won't", 'wouldn', "wouldn't"]
In [79]:
#Empty list to store clean words :
clean_words = []
for w in words_no_punc:
if w not in stopwords:
clean_words.append(w)
print(clean_words)
print("\n")
print(len(clean_words))
['thank', 'professor', 'wieland', 'introduction', 'thank', 'institute', 'monetary', 'financial', 'stability', 'opportunity', 'speak', 'come', 'moment', 'great', 'challenge', 'germany', 'europe', 'moment', 'never', 'evident', 'interests', 'europe', 'united', 'states', 'closely', 'aligned', 'america', 'stands', 'europe', 'defending', 'ukraine', 'understand', 'assault', 'democracy', 'europe', 'threat', 'democracy', 'everywhere', 'also', 'face', 'common', 'challenge', 'excessive', 'inflation', 'coincidence', 'since', 'germany', 'countries', 'dealing', 'many', 'forces', 'driving', 'inflation', 'united', 'states', 'fortunately', 'response', 'moment', 'common', 'challenges', 'interests', 'europe', 'united', 'states', 'strengthened', 'ties', 'believe', 'unified', 'today', 'decades', 'see', 'deepening', 'possible', 'broadening', 'security', 'commitments', 'also', 'see', 'strong', 'commitment', 'central', 'banks', 'europe', 'elsewhere', 'made', 'fight', 'inflation', 'today', 'distinguished', 'lecture', 'deal', 'two', 'distinct', 'topics', 'believe', 'interest', 'first', 'provide', 'outlook', 'economy', 'federal', 'reserve', 'plans', 'reduce', 'inflation', 'achieve', 'percent', 'target', 'pivot', 'academic', 'discussion', 'labor', 'market', 'possibility', 'soft', 'landing', 'taming', 'inflation', 'harm', 'employment', 'let', 'start', 'economic', 'outlook', 'united', 'states', 'despite', 'pause', 'early', 'year', 'growth', 'real', 'gross', 'domestic', 'product', 'gdp', 'economy', 'continues', 'power', 'along', 'healthy', 'pace', 'contraction', 'output', 'reported', 'first', 'quarter', 'due', 'swings', 'two', 'volatile', 'categories', 'inventories', 'net', 'exports', 'expect', 'repeated', 'consumer', 'spending', 'business', 'investment', 'bedrock', 'gdp', 'strong', 'recent', 'data', 'point', 'toward', 'solid', 'demand', 'continuing', 'momentum', 'economy', 'sustain', 'output', 'growth', 'months', 'ahead', 'another', 'sign', 'strength', 'labor', 'market', 'created', 'million', 'jobs', 'first', 'four', 'months', 'remarkably', 'steady', 'pace', 'slightly', 'month', 'last', 'year', 'unemployment', 'near', 'low', 'low', 'numbers', 'people', 'filing', 'unemployment', 'benefits', 'high', 'number', 'job', 'openings', 'indicate', 'slowdown', 'economy', 'fast', 'pace', 'last', 'year', 'yet', 'weighing', 'job', 'market', 'look', 'labor', 'force', 'participation', 'level', 'leaving', 'lot', 'room', 'improvement', 'however', 'underlying', 'factors', 'explain', 'participation', 'depressed', 'including', 'early', 'retirements', 'individual', 'choices', 'associated', 'covid', 'concerns', 'whatever', 'cause', 'low', 'participation', 'contributed', 'fact', 'two', 'job', 'vacancies', 'every', 'one', 'person', 'counted', 'looking', 'job', 'record', 'high', 'pandemic', 'labor', 'market', 'solid', 'shape', 'one', 'vacancy', 'every', 'two', 'unemployed', 'people', 'explain', 'tight', 'labor', 'market', 'implications', 'inflation', 'fed', 'plans', 'reducing', 'inflation', 'terms', 'need', 'recognize', 'robust', 'job', 'creation', 'underlying', 'strength', 'economy', 'expanding', 'productive', 'capacity', 'supporting', 'personal', 'income', 'ongoing', 'economic', 'growth', 'face', 'challenges', 'let', 'turn', 'outlook', 'fed', 'top', 'priority', 'inflation', 'said', 'december', 'inflation', 'alarmingly', 'high', 'remained', 'april', 'consumer', 'price', 'index', 'cpi', 'percent', 'year', 'year', 'headline', 'number', 'slight', 'decline', 'percent', 'march', 'primarily', 'due', 'drop', 'volatile', 'gasoline', 'prices', 'know', 'surged', 'month', 'core', 'inflation', 'strips', 'volatile', 'food', 'energy', 'prices', 'also', 'slightly', 'percent', 'april', 'percent', 'month', 'percent', 'monthly', 'increase', 'march', 'acceleration', 'february', 'march', 'rate', 'still', 'high', 'meanwhile', 'fed', 'preferred', 'measure', 'based', 'personal', 'consumption', 'expenditures', 'pce', 'recorded', 'headline', 'inflation', 'percent', 'core', 'percent', 'lower', 'readings', 'relative', 'cpi', 'reflect', 'differences', 'weights', 'various', 'categories', 'across', 'indexes', 'matter', 'measure', 'considered', 'however', 'headline', 'inflation', 'come', 'percent', 'year', 'core', 'inflation', 'coming', 'enough', 'meet', 'fed', 'target', 'anytime', 'soon', 'inflation', 'high', 'affects', 'everyone', 'especially', 'painful', 'households', 'spend', 'large', 'share', 'income', 'shelter', 'groceries', 'gasoline', 'necessities', 'fomc', 'job', 'meet', 'price', 'stability', 'mandate', 'get', 'inflation', 'determined', 'forces', 'driving', 'inflation', 'today', 'ones', 'emerged', 'year', 'ago', 'combination', 'strong', 'consumer', 'demand', 'supply', 'bottlenecks', 'shortage', 'workers', 'relative', 'labor', 'generating', 'high', 'inflation', 'argue', 'whether', 'supply', 'demand', 'greater', 'factor', 'details', 'bearing', 'fact', 'meeting', 'fomc', 'price', 'stability', 'mandate', 'care', 'getting', 'inflation', 'avoid', 'lasting', 'escalation', 'public', 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In [80]:
#Frequency distribution :
fdist = FreqDist(clean_words)
fdist.most_common(10)
Out[80]:
[('unemployment', 57),
('rate', 56),
('inflation', 45),
('vacancies', 35),
('percent', 29),
('labor', 29),
('policy', 20),
('market', 19),
('year', 19),
('level', 19)]
In [81]:
#Plot the most common words on grpah:
fdist.plot(10)
In [82]:
#Library to form wordcloud :
from wordcloud import WordCloud
#Library to plot the wordcloud :
import matplotlib.pyplot as plt
#Generating the wordcloud :
wordcloud = WordCloud().generate(text)
#Plot the wordcloud :
plt.figure(figsize = (12, 12))
plt.imshow(wordcloud)
#To remove the axis value :
plt.axis("off")
plt.show()
