Yellen comments out early
- Gradual approach to rate hikes particularly appropriate in light of subdued inflation, low neutral rate
- Would be imprudent to leave rates on hold until inflation reaches 2%
- Fed can still achieve 2% inflation goal even if it is underestimating slack or overestimating inflation expectations
- Downward pressure on inflation could prove to be unexpectedly persistent
- There are 'considerable' odds that inflation won't stabilize at 2% over next few years
- Suggests labor market is healthy, without too much slack but not overheated
- Evidence on labor market is not definitive, must be 'open-minded'
- FOMC should be wary of moving too gradually
- Imprudent to keep policy on hold until inflation at 2%
- Sees risks of overheating without modest hikes over time
These comments came out early on Reuters, then a few minutes later Bloomberg led with the bolded headline. The main headlines from Reuters were a bit more dovish, while they're more hawkish from Bloomberg. What that says is that you should really read the full speech.
"It would be imprudent to keep monetary policy on hold until inflation is back to 2 percent," she said Tuesday in the text.
"My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation," she said.
