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Fed Chief Sees Not Enough Data to Raise Rates

New York Times - August 22, 2014, by Binyamin Appelbaum - Janet L. Yellen, the Federal Reserve chairwoman, said Friday that the economy was improving but that the Fed was awaiting more evidence about the health of labor markets before deciding when to start raising interest rates.

Ms. Yellen’s first keynote speech at the annual conference here in the shadow of the Grand Tetons was mostly an extended explanation of the reasons for the Fed’s caution, and an effort to buy time for the Fed to deliberate. She emphasized her view that no single factor, including inflation, could be used to judge the recovery.

“While these assessments have always been imprecise and subject to revision, the task has become especially challenging in the aftermath of the Great Recession,” she said, both because of the recession’s “nearly unprecedented” depth and because of simultaneous changes in the economy, including the aging of the work force.

Ms. Yellen reiterated the Fed’s basic guidance after its July meeting that its policy of holding short-term interest rates near zero remained necessary and useful to reduce the share of Americans who cannot find full-time work. She said that the gap between current conditions and a return to full health remained “significant.”



Janet L. Yellen, the Fed chairwoman, arriving at the annual conference at Jackson Hole, Wyo. Credit David Stubbs/Reuters

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.

Ms. Yellen’s audience Friday includes some of the most prominent internal critics of her policy, including her host, Esther George, the president of the Federal Reserve Bank of Kansas City, which sponsors the annual conference, and Charles Plosser, president of the Federal Reserve Bank of Philadelphia, who dissented at the last meeting of the Fed’s policy-making committee. Both argue that the Fed has neared the limits of its ability to improve the health of the economy, and that persisting in its efforts could loosen the central bank’s control over price inflation.

A small group of demonstrators also made the trek to the remote resort hotel in the middle of Grand Teton National Park, to urge Fed officials to continue the stimulus campaign. They formed a receiving line for policy makers in the lobby outside the conference, dressed in green T-shirts emblazoned “What Recovery?”



Janet L. Yellen, the Fed chairwoman, speaks with Ady Barkan, a lawyer with the Center for Popular Democracy, which held a demonstration at the conference. Credit David Stubbs/Reuters

“The Federal Reserve decides how many of us will remain unemployed and whether our wages will go up or stay low,” said Reuben Eckles, the pastor of a church in Wichita, Kan. “They need to hear voices from everyday people.”

The demonstration was organized by the Center for Popular Democracy, a nonprofit group that has focused its campaigns on microeconomic issues like the minimum wage and sick days. Ady Barkan, a lawyer with the group, said it had decided there was a need to focus on the big picture, too.

Mr. Barkan said Ms. Yellen had briefly engaged with the demonstrators as she arrived at the conference Thursday. “She said, ‘We understand the issues you’re talking about and we’re doing everything we can,'” he said.

The demonstrators also spent two hours speaking with Ms. George on Thursday, and said she told them the Fed needed to pull back soon.