September 17, 2014
JYJanet L. YellenSeptember 17, 2014 FOMC Press Conference
- The chair said the FOMC released a separate document on policy normalization principles and plans, which was not mentioned in the statement.
- The chair said the median projection for the federal funds rate at the end of 2016 is 2.9 percent, nearly a percentage point below the longer-run normal level of about 3¾ percent.
- The chair said the FOMC now anticipates establishing a target range, rather than a single point, for the federal funds rate when normalization begins.
- The chair said the primary tool for moving the federal funds rate into the target range will be the interest rate paid on excess reserves (IOER), and that the federal funds rate will trade below the IOER rate while reserves are plentiful.
- The chair said the FOMC expects to cease reinvestments of principal on securities after the initial increase in the target range for the federal funds rate, and does not anticipate selling agency mortgage-backed securities as part of normalization.
From the opening statement
Press conference
CHAIR YELLEN. Good afternoon. The Federal Open Market Committee concluded its meeting earlier today and, as usual, released its monetary policy statement. The Committee also released a document describing the approach the Committee intends to take when, at some point in the future, it becomes appropriate to begin normalizing the stance of policy. Let me underscore that our release of this information is not meant to convey any change in the stance of policy. As you know, the FOMC’s views on policy are conveyed in the policy statement, which I will now discuss before coming back to our normalization plans.
As indicated in our policy statement, the FOMC decided to make another reduction in the pace of its asset purchases. The Committee also maintained its forward guidance regarding the federal funds rate target and rea ffirmed its view that a highly accommodative stance of monetary policy remains appropriate. Let me discuss the economic conditions that underpin these actions.
The economy is continuing to make progress toward the FOMC’s objective of maximum sustainable employment. In the labor market, conditions have improved further in recent months. Although the pace of job growth has slowed some recently, job gains have averaged more than 200,000 per month over the past three months. The unemployment rate was 6.1 percent in August, two-tenths lower than the data available at the time of the June FOMC meeting. Broader measures of labor market utilization, such as the U-6 measure, have shown similar improvement, and the labor force participation rate has flattened out. These developments continue the trend of gradual progress toward our employment objective. But the labor market has yet to fully recover. There are still too many people who want jobs but cannot find them, too many who are working part time but would prefer full-time work, and too many who are not searching for a job but would be if the labor market were stronger. As noted in the FOMC statement, “a range of labor market indica tors suggests that there remains significant underutilization of labor resources.”