The president of the Federal Reserve (Fed), Janet Yellen, has once again send a message of caution to note that the central bank should exercise caution and not rush to tighten monetary policy because American labor market still weighed down by the crisis.
Speaking at the annual meeting of central bankers taking place this weekend in Jackson Hole (Wyoming, USA), Yellen ambiguous shown on a possible early rise in interest rates. The Fed President reiterated that the regulator should be cautious in determining when will the American economy strong enough to raise rates (now at its lowest level between 0.25% and 0%).
In this regard, the American official pointed out that “there is no simple recipe for an appropriate monetary policy in the current labor market of USA.” Furthermore, Yellen warned that “tightening monetary policy prematurely, while inflation is heading 2%, could prevent full recovery of the labor market.”
The president of the Fed has also highlighted the “significant progress” has experienced the American economy, which is “closer to the objectives” of the central bank. Yellen acknowledged that, at this time, members of the Federal Open Market Committee (FOMC, for its acronym in English), discuss how and when to back off on the “extraordinarily accommodative” policy adopted by the entity.
“The economy is moving closer to our goals,” he acknowledged Yellen, who also pointed out that, despite the strong improvement seen “the labor market recovery is not yet complete.”
“The emphasis of the FOMC is changing naturally to questions about the degree of weakness and the speed with which it was overcome, and thus the question as to under what conditions should we turn back to our extraordinary ACCOMMODATION”, explained the chairman of the Fed.
Yellen has shown ambiguous about the possibility of an early rise in interest tass and insisted that “there is no simple recipe” on what the appropriate policy in this context. Thus, as explained by the banker, the Fed will pay particular attention to the need to clearly inform the framework used to meet its challenges.
Keep an excessive degree of accommodation of monetary policy to emerge inflationary pressures may cause undue delay in the withdrawal of measures, leading to a further hardening of the most abrupt and potentially damaging monetary policy, as explained.
In contrast, adopt a less flexible position as ENFILE soon as inflation to 2% can stop the complete recovery of the labor market, which would not be consistent with the dual mandate of the Fed.
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