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Photo illustration: Megan Robinson. Photo: Federalreserve, Public domain, via Wikimedia Commons

Speed up the taper, supercharge communication and release the digital coin white paper — this is advice to the Federal Reserve from a surprising source: college kids.

The backstory: For a few minutes each year, the students act as Fed officials and compete to pitch staffers the best direction for the nation’s economy.

Why it matters: Forget what seasoned Wall Street types think. Here’s fresh perspective from your next colleague or boss — and maybe the next policymakers.

  • This competition is a window for the Fed to see how young people look at the economy. To that extent, people should care what we have to say about inflation and employment,” says Liza Brover, a senior at the University of Pennsylvania who competed in the College Fed Challenge this year.

Flashback: This fall, college Fed clubs around the country took a look at the economy: the Delta variant was still surging. Inflation was hot, but it appeared to be transitory. Job gains looked to have slowed.

  • Those students debuted a (virtual) policy decision based on those conditions — much like the real one we get every six weeks or so. The best presentation wins round one (and then moves on to Q&A with central bank economists and other employees).
  • The winner? Pace University. That team, which now has more victories than any other group in the competition’s 18-year history, recommended the Fed issue a new document that’s more explicit about the path of the economy (among other recommendations at the time, like keeping the current pace of its asset purchases).

What they’re saying: “It’d be around two pages, just letting market participants into the mind of the Fed and the specific indicators that help guide their outlook — at least while we’re in this transitional period with COVID-19,” says Fiona Waterman, a Pace senior and team co-captain.

  • That advice still holds as the Fed made a hard pivot this week: bowing to the possibility that soaring prices might stick around, so it will likely speed up the tapering of its pandemic-era bond purchases — and an interest rate hike might not be so far off.
  • “The Fed should be more specific about what kind of conditions would trigger liftoff. If the economy continues to grow and inflation stays elevated, how long can the Fed afford to wait to raise rates?,” says Winnie Liu, another Pace captain.

Other students say the central bank should have better prepared the public for that switch-up.

  • “What we would have hoped to see was the conditions which would have led the Fed to reconsider whether inflation is transitory laid out way ahead of time, maybe in September or August,” says Brian Lee, a sophomore at University of Pennsylvania (and co-captain of the club that won second place this year).

Worth noting: The students say the Fed should make it more clear where they stand on central bank-issued digital coins.

  • “Powell did promise to release a white paper about what the Fed thinks about CBDCs this summer. It’s really cold now and we haven’t seen the white paper,” says Isaac Tham, a senior at University of Pennsylvania. (Powell told Congress on Tuesday it’s expected to be released in the next few weeks.)

The bottom line: Fed challenge alumni land at Wall Street’s big banks, think tanks and sometimes the Fed itself. (Then there’s Transportation secretary Pete Buttigieg, who competed in the high school version of the challenge.)

Go deeper

Biden names Sarah Bloom Raskin as Fed's top banking regulator

Sarah Bloom Raskin during a Fed meeting in 2013. Photo: Andrew Harrer/Bloomberg via Getty Images

President Biden will nominate Sarah Bloom Raskin as the Federal Reserve's top Wall Street cop, a Biden administration official said, one of three nominees being unveiled for the critical open seats on the central bank's board of governors.

Why it matters: It's Biden's biggest mark yet on the influential economic body that's center stage as the country grapples with inflation rising at the fastest pace in decades and a recovering labor market.

Rising mortgage rates could slow house price surge

Chart: Axios Visuals

Mortgage rates have jumped to their highest level since early 2020.

Why it matters: The rising cost of home loans could slow the booming American market for residential real estate.

Ben Geman, author of Generate
Jan 14, 2022 - Energy & Environment

Biden's latest Fed pick signals brewing climate battles

Illustration: Sarah Grillo/Axios

President Biden's plan to tap Sarah Bloom Raskin as top banking regulator at the Federal Reserve could intensify the central bank's already growing focus on climate change.

Catch up fast: The news broke Thursday night that Biden will nominate Raskin, a Duke University law professor, for the powerful role of vice chair for supervision.