‘Now the focus is different and we want to make sure that we sustain the progress that we have achieved, and that the appropriate stance of policy now is something closer to neutral.’ – Janet Yellen, Federal Reserve
On Monday, Janet Yellen, the Chairman of the US Federal Reserve, delivered a speech on monetary policy at the University of Michigan. She noted that country went through a long and severe recession, as the Fed failed to identify growth of systemic risks, which made the country’s financial system very vulnerable. Nevertheless, she believed that the Central bank’s course of recovery was chosen correctly, with unemployment standing now at 4.5% and inflation fluctuating just above the targeted 2%. These figures showed that the economy was growing at a moderate pace. She noted that consumer spending remained the main driver of economic growth but added that there were significant improvements in housing and investment. The similar picture was observed in terms of the global economy, which also became more robust and healthier. Altogether, the Federal Reserve Chair suggested that the economy would continue developing at a modest pace. Thus, the Fed’s main objective should be to sustain the achieved result, i.e. full employment, and stabilize inflation around 1.75%-2%. She noted that if the economy continues to perform in line with the Fed’s objectives, it would gradually raise short-term interest rates in the upcoming months.
