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30 Mar 2015
‘I expect an increase in the federal funds rate target sometime this year’ – Fed Chair Yellen
FXStreet (Mumbai) - The Federal Reserve (Fed) Chair Janet Yellen suggested at a conference hosted by the San Francisco Fed that 2015 will be the year in which policymakers do away with zero interest rates, unless another bout of disinflationary pressures were to hit or the labour recovery faltered.
Fed Chair Yellen noted, "Like most of my [Federal Open Market Committee] colleagues, I believe that the appropriate time has not yet arrived, but I expect that conditions may warrant an increase in the federal funds rate target sometime this year,"
"A modest increase in the federal funds rate" would be unlikely to hurt the economy although it might "slow its pace somewhat."
Once the FOMC starts tightening though, it will not embark on any predetermined course "one that, for example, would involve similarly sized rate increases at every meeting or on some other schedule,"
"I would not consider it prudent to postpone the onset of normalization until we have reached, or are on the verge of reaching, our inflation objective," she said, adding that keeping rates too low for too long might "encourage inappropriate risk-taking by investors."
Fed Chair Yellen noted, "Like most of my [Federal Open Market Committee] colleagues, I believe that the appropriate time has not yet arrived, but I expect that conditions may warrant an increase in the federal funds rate target sometime this year,"
"A modest increase in the federal funds rate" would be unlikely to hurt the economy although it might "slow its pace somewhat."
Once the FOMC starts tightening though, it will not embark on any predetermined course "one that, for example, would involve similarly sized rate increases at every meeting or on some other schedule,"
"I would not consider it prudent to postpone the onset of normalization until we have reached, or are on the verge of reaching, our inflation objective," she said, adding that keeping rates too low for too long might "encourage inappropriate risk-taking by investors."