Yellen Excerpt:Longer Period of Strong Labor To Reach Infl Obj

     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.

Question:

     You said we are at full employment, you said you are expecting a tax

package to deliver a significant stimulus, and that it will be on the demand

side. You expect growth to be faster, you expect unemployment to be lower, and

yet somehow inflation is going to remain at 2 percent for the foreseeable

future. Could you describe what has changed about your economic assessment so

that everything has changed except inflation? 

Yellen:

     The projections that we are showing you today, many factors went into that

fiscal policy being one of a number of different factors. You are looking at 16

participants who have made adjustments to their economic outlook for a whole

variety of reasons, including in some cases rethinking some of the fundamentals

that went into their original forecast. 

     So there have been modifications in different directions by different

participants. So, it's, I would caution you about the dangers of looking at the

median and acting like that is one individual who's made a change to their

forecast. That's a leap that isn't quite justified. 

     But look, generally, you see modestly faster growth over the next couple of

years, which is consistent and I said, I think, for most participants, reflects

partly an impact from taxes stimulating consumer and investment spending. But

it's not a gigantic increase in growth that since, relative to September. 

     You do see a lower path for unemployment, but remember that inflation has

also been running low on a persistent basis, and the committee does have a

concern about inflation and wants to see it moving up. And on balance, you see

only modest changes, slight revisions to the path for the fed funds rate. You

might think, well, shouldn't I see more? Well, okay, growth is a little

stronger, the unemployment rate runs a little bit lower, that would perhaps push

in the direction of slightly tighter monetary policy. 

     But again, counterbalancing that is that inflation has run lower than we

expect, and it could take a longer period of a very strong labor market in order

to achieve the inflation objective.

--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com

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