Federal Reserve Board Chair Janet Yellen made her first public speech Wednesday at the Economic Club of New York. (File/UPI/Mike Theiler) |
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NEW YORK, April 16 (UPI) -- Janet Yellen, in her first speech to a Wall Street audience, said that the Federal Reserve would continue support the U.S. economic recovery, which she estimated could take two more years.
Speaking at the Economic Club of New York, Yellen said investors should pay close attention to unemployment and inflation rates to estimate when the Fed's Federal Open Market Committee will change its rates policy, but maintained that the FOMC will continue to "maintain the appropriate degree of accommodation to support the recovery.”
“The larger the shortfall of employment or inflation from their respective objectives, and the slower the projected progress toward those objectives, the longer the current target range for the federal funds rate is likely to be maintained,” Yellen said.
The Fed's own forecast estimates unemployment to bottom out and inflation to pick up by 2016, but Yellen said that those expectations were far from certain and that the Fed would be flexible if conditions change.
“If the economy obediently followed our forecasts, the job of central bankers would be a lot easier and their speeches would be a lot shorter,” Yellen said.
Yellen said March's unemployment rate is more than one percentage point above what the Fed considers a normal level -- 5.2 percent to 5.6 percent. The central banker reiterated that the high number of long-term unemployed and people working part-time are worrying signs for the labor market.
Yellen linked a stronger job market to helping push inflation back to two percent, the sign of a healthy business environment. Currently price changes and consumption suggest that inflation is about half that mark.
“The limited historical experience with deflation shows that, once it starts, deflation can become entrenched and associated with prolonged periods of very weak economic performance,” she said.
The Fed has been intentionally fuzzy in its last policy statement, saying it will consider progress toward two percent inflation and full employment before changing rates from current near-zero levels.
[Washington Post]
[Bloomberg]
