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Wednesday, March 30, 2016

Fed to “Proceed Cautiously”

In a speech to The Economic Club of New York, Federal Reserve Chair Janet Yellen said that the committee should proceed cautiously in adjusting monetary policy. “This caution is especially warranted because with the federal funds rate so low, the FOMC’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric.”

The Chair cited mixed domestic indicators, and concerns about global economic and financial developments in her speech, noting that foreign growth will likely be weaker than previously expected this year.

In addition, Yellen cited risks to the inflation outlook, noting that it had become “more uncertain since the turn of the year,” as foreign developments could delay the return of inflation to 2 percent. The Chair noted that these developments would “likely require a lower path for the federal funds rate than was anticipated in December.”

Read the speech.
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