Fed Chair Yellen: Have to be cautious about starting too early or too late on liftoff - Q&A
- most important positive of rate hike would be the signal that US economy has made great progress, hopeful that would increase confidence
- Reiterates timing of first rate hike is less than important than overall trajectory of rate policy over time
- Committee will look at a wide variety of data in making decision on when lift off is appropriate; there is no simple formula; reiterates still looking for more progress on labor market and there has been some progress on inflation
- USD has largely stabilized. Have seen an appreciable increase in the dollar since last summer, its had a negative effect on net exports and been something of a drag on the economy and that drag will continue for some time
- reiterates there is no plan to conduct any mechanical approach on rates, unclear what 'problem' at the Federal Reserve Congress would be trying to fix
- Have not made any new decisions on timing of when balance sheet reinvestment policy will change, beyond what we have previously said in that it will change after the process of normalizing policy begins.
- Dot chart clearly demonstrates most FOMC participants expect rates to start rising this year if our economic forecast holds
- Reiterates no decision made on timing of liftoff; Data could justify a hike this year.
- IMF plays a useful role in review economic policies of all its members; New data has emerged since IMF comments (**Recall last week IMF urged FOMC to hold rates unchanged until 2016)
- Hard to predict market reaction to Fed decision; uncertainty in the market about long term rates does not appear to be unusually high; will do what we can to minimize needless volatility
- Sees unusually large elements of slack outside jobless rate; There are some tenative signs wage growth is picking up.
- Increase in housing prices is helping restore wealth for many people for whom their home is their major investment asset. Credit availability for mortgages remains quite constrained.
- Sees potential disruptions in European and global economy if Greece does not reach agreement with creditors; US has little exposure.
- Data in recent weeks suggests consumer spending is growing at a moderate pace; car sales were very strong, in part payback from weaker sales in winter months.
- Not convinced that we have seen response to the drop in oil prices improving household finance (Decline in oil prices represents about $700 per household).