Janet Yellen, president of the Federal Reserve, talking to a protester / John Locher (AP)
Janet Yellen, president of the Federal Reserve (Fed), believes that the United States economy is approaching targets. And again he said that if the labor market is progressing faster than expected will have to anticipate the process leading to the first interest rate hike in eight years. But if everything goes slower, it takes longer. Yellen thus gives flexibility although it is clear that the policy of 0% has an expiration date even though it will not be coming
This is the first speech by Janet Yellen at the annual meeting of central bankers in Jackson Hole, as the highest representative of the Fed. After lunch will be the turn of Mario Draghi, the ECB president. The symposium in the Rockies is designed to discuss monetary theory. This year the focus of discussions on the broken labor market dynamics
. There are three problems that largely explain why the recovery from the last recession is so slow and uneven, with low participation rate, stagnant wages and part-time employee. A Yellen is also concerned about the long-term unemployment and youth, through its effect on productivity and the future performance of the economy
problems are carried dragging for years and will continue in the medium term there. That does not mean, however, that the debate within the Fed on monetary return to normalcy is hot. What interest rates will rise in the USA is a fact. What is seen is when and at what pace. There are members who ask for calm and others that the first step is suddenly
. More job creation
Yellen said in his speech that are being discussed within the Fed about these issues. But he said there are many variables to take into account to analyze the labor market situation. Moreover, he acknowledged that it is difficult to differentiate whether the contraction in labor is structural or cyclical. He did say that wages can rise without creating inflation
. “The economy has made considerable progress since the end of the Great Recession five years ago, “said Yellen to start his speech. This year it is creating jobs at a rate of 230,000 new workers per month, about 40,000 more than in the previous two years. The unemployment rate, meanwhile, is about 6%, four percentage points lower than at the end of 2009 Despite this improvement, “the labor market should fully recover.”
The president of the Fed considers “natural” that the debate is now starting to rotate around the time in which they must climb rates. “With the economy closer to our goals, it is natural that the emphasis veer remaining obstacles, how fast it can be overcome and therefore that conditions must begin to withdraw extraordinary stimulus,” said
<. P class = "western" lang = "en-US" xml: lang = "en-US"> John Williams, president of the San Francisco Fed, is among those who believe that the first rate hike can wait a year until Although summer of 2015 sees improvements in the labor market, feels justified in maintaining the plan. He is considered one of the pigeons, for their laxity. Among the hawks is Charles Plosser, Philadelphia Fed. He sees a risk in the current strategy
. Plosser and broke in the last meeting with the consensus. He voted against it because he felt that he had to withdraw from the final communiqué reference to the rates remain at zero for a “considerable time” after exhaling buying bonds. In your case fears for an upturn in inflation, requiring speed up the whole process. But it is unemployment that now separates the two sides
. Artillery another crisis
Yellen has no “single recipe” to follow. Already admitted in the past to extend the current strategy has risks. However, not to give premature steps. Most members of the Fed actually believes advisable to wait for more data become available before deciding. James Bullard of St. Louis Fed, does not think things are as bad as it looks
. The Fed also needs to raise rates to have artillery with which to fight the next crisis. The reduction of the price of money is the most effective way to deal with a new stage of contraction immediately instrument. Before, however, may be forced to make a move ahead if inflation accelerates. For now, it is contained about 2%
. In recent weeks emerged the idea that the Fed might be preparing a fourth round of unconventional stimulus pathway. Jackson Hole was the scenario that Ben Bernanke used to announce the second rate cut by quantitative way and two years later introduced what was dubbed “Operation twits” to hold down long-term rates.
It was a different time. Yellen he did was reiterate that massive bond-buying program will end in October. In July we proceeded to a further cut, to 25,000 million per month. The original mechanism allowed to buy debt assets worth 85,000 million when activated at the end of 2012 The downturn began in December.
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