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WASHINGTON (MNI) - The following is a response of Federal Reserve Chairman
Janet Yellen to a question from a reporter at her press conference following
Wednesday's Federal Open Market Committee meeting.
A couple longer term questions. First of all, midway through the year you
talked about the issue of whether inflation targets might need to be raised.
There has been more debate in the fed system since then about this. It may not
be a imminent issue but do you expect it to be something the fed should be
discussing over the coming years, some sort of change to the inflation target?
Second of all, the amount of stimulus tools that the fed may have at its
disposal in the next downturn strikes are fairly limited. One of the incoming
governors has talked about the merits of negative interest rates. I wondered
whether you see that as a potential, at least in theory for the fed to consider
should it run out of other options. Thanks.
So, right now, the FOMC is not discussing or considering its inflation
target. We do see inflation is likely moving up to target over the next couple
of years. I would say, you said our stimulus tools are limited. I would want to
emphasize that if there were a negative shock to the economy, we do have some
scope to cut the fed funds rate, and there are other tools available, ones that
we have used previously for with guidance in asset purchases.
I think we are not, I wouldn't say that we are out of ammunition. But
certainly, it's been recognized, and I've emphasized myself, that in the longer
run, we may be and we will have to see how this works out, but we may be in low
interest rate environments where it could prove useful to have additional scope
to conduct monetary policy. And in that context, I think additional research,
that academic economists and others are thinking hard about, what more could be
done, and I think these are matters that are certainly worthy of further study.
You do believe that negative [inaudible] at least in theory are possible in
the U.S. at some point if it should be necessary, at least in theory.
So I mean on that I would say, we have, that is not something that we have
studied inside the fed, to any considerable extent and haven't seriously thought
about using ourselves during this last downturn and recovery. We have watched
what happened in other countries. I think that is worthwhile. I would say it's
an area that academics may have interest in, in the future, and is worthy of
some study. But it hasn't been part of the fed's agenda.
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