|08-22-2014, 06:03 PM||#1|
Janet Yellen says Fed needs more evidence before deciding on interest rates
Federal Reserve Chair Janet Yellen said Friday the Fed awaiting further evidence about the health of the labor market and the economy before making a decision on interest rates.
Yellen`s words were focused on the labor market, which she said still hasn`t recovered from the financial crisis.
"First, the sluggish pace of nominal and real wage growth in recent years may reflect the phenomenon of `pent-up wage deflation,`" Yellen said. Yellen added that despite strengthening indicators in the labor market, she still sees "significant" underutilization of labor resources.
The Chairman said that the " functioning of the labor market have made it more difficult to judge the remaining degree of slack". Differing interpretations of these developments affect judgments concerning the appropriate path of monetary policy, the Fed Chair added.
Acknowledging the uncertainty surrounding this assessment, Ms. Yellen added that the Fed was prepared to adjust as the economic evidence became clearer, either moving more quickly to raise rates, or holding steady for even longer. She said the Fed still expects to end the expansion of its bond holdings in October.
She also emphasized her view that no single factor, including inflation, could be used to judge the recovery.
Yellen added that given the labor market outlook, "There is no simple recipe for appropriate policy in this context, and the FOMC is particularly attentive to the need to clearly describe the policy framework we are using to meet these challenges."
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