Yellen's Semiannual Report
Federal Reserve Chair Janet Yellen spoke yesterday to the Committee on Financial Services, U.S. House of Representatives and gave her "Semiannual Monetary Policy Report to the Congress. She said on Monetary Policy, "Given the economic situation I just described, monetary policy has remained accommodative over the first half of this year to support further improvement in the labor market and a return of inflation to our 2 percent objective. Specifically, the FOMC has maintained the target range for the federal funds rate at 1/4 to 1/2 percent and has kept the Federal Reserve's holdings of longer-term securities at an elevated level. The Committee's actions reflect a careful assessment of the appropriate setting for monetary policy, taking into account continuing below-target inflation and the mixed readings on the labor market and economic growth seen this year.... Another factor that supports taking a cautious approach in raising the federal funds rate is that the federal funds rate is still near its effective lower bound. If inflation were to remain persistently low or the labor market were to weaken, the Committee would have only limited room to reduce the target range for the federal funds rate. However, if the economy were to overheat and inflation seemed likely to move significantly or persistently above 2 percent, the FOMC could readily increase the target range for the federal funds rate. The FOMC continues to anticipate that economic conditions will improve further and that the economy will evolve in a manner that will warrant only gradual increases in the federal funds rate."
