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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.
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?
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: email@example.com