The following are highlights from Federal Reserve chair Janet Yellen’s press conference following the end of a two-day meeting of the US central bank’s policy-setting committee.
ON ‘MODEST’ ADJUSTMENT TO PROJECTED RATE HIKE PATH
“This is a very modest adjustment in the path of the Fed funds rate, and involves changes by only some of the participants. Some of the participants, but not all of the participants, did incorporate some change in fiscal policy into their projections, and that may have been a factor.”
ON FISCAL POLICY
“Changes in fiscal policy or other economic policies could potentially affect the economic outlook. Of course it is far too early to know how these policies will unfold. Moreover, changes in fiscal policy are only one of the many factors that can influence the outlook in the appropriate course of monetary policy.”
ON FED INDEPENDENCE
“Well I’m not going to offer the incoming President advice about how to conduct himself in policy. I’m a strong believer in the independence of the Fed. We have been given the independence by Congress to make decisions about monetary policy in pursuit of our dual mandate objectives of maximum employment and inflation, and that is what I intend to stay focused on. That is what the committee is focused on.”
ON FED NOT BEHIND THE CURVE
“We are not seeing evidence in labour markets of very substantial upward pressures on labour that could signify extreme shortages of labour that could propel inflation higher in a very rapid way, and inflation is still operating below our objective. So I do not judge that we are behind the curve. My judgment is that we are in a good path to reaching our objectives. But of course, the outlook is uncertain.”
ON FISCAL POLICY NOT NEEDED TO STIMULATE LABOUR MARKET
“There may be some additional slack in labour markets, but I would judge that the degree of slack has diminished. So I would say at this point that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment.
“But nevertheless let me be careful that I am not trying to provide advice to the new administration or to Congress as to what is the appropriate stance for policy. There are many considerations that Congress needs to take account of and many bases for justifying changing fiscal policy.”
ON CURRENT ‘MODERATE’ LEVEL OF ACCOMMODATION
“The degree of accommodation I would characterise as moderate … We currently judge the neutral level of the federal funds rate to be pretty low. So there is some accommodation. Remember that inflation is still below our objective.”
ON RATE HIKE AS A VOTE OF CONFIDENCE IN ECONOMY
“Our decision to raise rates should certainly be understood as a reflection of the confidence we have in the progress the economy has made and our judgment that that progress will continue … It is a vote of confidence in the economy.”