Yellen says Fed will keep target inflation objective

Federal Reserve Chairwoman Janet Yellen expressed confidence Thursday that the U.S. central bank will be able to keep inflation at its target even as it slowly reduces its massive investment portfolio and continues to…

Yellen says Fed will keep target inflation objective

Federal Reserve Chairwoman Janet Yellen expressed confidence Thursday that the U.S. central bank will be able to keep inflation at its target even as it slowly reduces its massive investment portfolio and continues to raise interest rates.

Speaking before Congress’ Joint Economic Committee, Ms. Yellen said the Fed aims to achieve two goals: to achieve “further progress toward the Committee’s inflation objective” and to “move the federal funds rate to a stance that returns policy to a neutral stance and therefore keeps the economy operating close to potential.”

Ms. Yellen said that the dual goals are achievable even as the Fed begins trimming its $4.5 trillion portfolio, which is composed largely of bonds from the 2007-2009 financial crisis and recession.

“Our inflation goal remains within reach,” Ms. Yellen said. “At our March meeting, the Committee indicated that it expected inflation to remain close to the Committee’s symmetric 2 percent objective over the medium term.”

Ms. Yellen’s testimony followed comments earlier Thursday from Atlanta Fed President Raphael Bostic, who said the Fed will likely slow the pace of portfolio shrinkage as unemployment begins to rise. But he said the pace of the portfolio reduction will be judged against inflation, which remains well below the Fed’s long-term target.

Ms. Yellen said the Fed is likely to begin shrinking its portfolio in the coming months, but there’s no set timetable. However, she said, “as we assess our options for reducing the size of our portfolio, we continue to believe that the most likely adjustment will take place sooner rather than later.”

Leave a Comment