March 19, 2014
JYJanet L. YellenMarch 19, 2014 FOMC Press Conference
- The unemployment rate stood at 6.7 percent, three-tenths lower than at the December meeting, and broader measures like the U-6 fell even more.
- The central tendency of FOMC participants' unemployment rate projections for end-2014 was 6.1 to 6.3 percent, down about two-tenths since December.
- The central tendency of real GDP growth projections for 2014 was 2.8 to 3 percent, and inflation projections were 1.5 to 1.6 percent for 2014, rising to 1.7 to 2.0 percent by 2016.
- The revised forward guidance was meant to provide more information on how the FOMC would decide policy after the unemployment rate declines below 6½ percent, focusing on the size and expected persistence of shortfalls from employment and inflation objectives.
- The FOMC's new guidance suggested that even after employment and inflation reach mandate-consistent levels, the federal funds rate would likely remain below its longer-run normal level for some time, implying a shallower glide path for rate increases.
From the opening statement
Press conference
CHAIR YELLEN. Good afternoon. I am pleased to join you for the first of my post- FOMC press conferences. Like Chairman Bernanke before me, I appreciate the opportunity these press conferences afford to explain the decisions of the FOMC and respond to your questions.
The Federal Open Market Committee concluded a two-day meeting earlier today. As you already know from our statement, the Committee decided to make another modest reduction in the pace of its purchases of longer-term securities. The Committee also updated its guidance regarding the likely future path of the short-term interest rates. As I’ll explain more fully in a moment, this change in our guidance does not indicate any change in the Committee’s policy intentions as set forth in its recent statements; rather, the change is meant to clarify how the Committee anticipates policy evolving after the unemployment rate declines below 6½ percent. Let me explain the economic outlook that underlies these actions.
Despite some softer recent data, the FOMC’s outlook for continued progress toward our goals of maximum employment and inflation returning to 2 percent remains broadly unchanged. Unusually harsh weather in January and February has made assessing the underlying strength of the economy especially challenging. Broadly speaking, however, the spending and production data, while somewhat weaker than we had expected in January, are roughly in line with our expectations as of December, the last time Committee participants submitted economic projections. In contrast, labor market conditions have continued to improve. The unemployment rate, at 6.7 percent, is three-tenths lower than the data available at the time of the December meeting. Further, broader measures of unemployment—such as the U-6 measure, which includes marginally attached workers and those working part time but preferring full-time work—have fallen even more than the headline unemployment rate over this period, and labor force participation has ticked up. While the Committee continues to monitor developments in global financial markets carefully, financial conditions remain broadly consistent with the FOMC’s objectives. In sum, the FOMC continues to see sufficient underlying strength in the economy to support ongoing improvement in the labor market.