December 17, 2014
JYJanet L. YellenDecember 17, 2014 FOMC Press Conference
- The FOMC considers it unlikely to begin the normalization process for at least the next couple of meetings, interpreting "patient" as meaning no liftoff for at least two meetings.
- Almost all FOMC participants believe it will be appropriate to begin raising the federal funds rate target range in 2015, assuming the economy evolves broadly in line with expectations.
- The central tendency of FOMC participants' unemployment rate projections for the end of 2015 is 5.2 to 5.3 percent, in line with its estimated longer-run normal level.
- The central tendency of the inflation projections is 1.0 to 1.6 percent for 2015, rising to 1.8 to 2.0 percent in 2017.
- The median projection for the federal funds rate by late 2016 is 2.5 percent, more than 1 percentage point below the longer-run value of 3¾ percent or so projected by most participants.
From the opening statement
Press conference
CHAIR YELLEN. Good afternoon. The Federal Open Market Committee concluded its last meeting of the year earlier today. As indicated in our policy statement, the FOMC “reaffirmed its view that the current 0 to ¼ percent target range for the federal funds rate remains appropriate.” The Committee also updated its forward guidance for the federal funds rate, indicating that “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.” This new language does not represent a change in our policy intentions and is fully consistent with our previous guidance, which stated that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the end of our asset purchase program. But with that program having ended in October, and the economy continuing to make progress toward our objectives, the Committee judged that some modification to our guidance is appr opriate at this time. I will have more to say about our policy decisions in a moment, but first let me review recent economic developments and the outlook.
In the labor market, progress continues toward the FOMC’s objective of maximum employment. The pace of job growth has been strong recently, with job gains averaging nearly 280,000 per month over the past 3 months; over the past 12 months, job gains averaged nearly 230,000 per month. The unemployment rate was 5.8 percent in November, three-tenths lower than the latest reading available at the time of the September FOMC meeting. Broader measures of labor market utilization have shown similar improvement, and the labor force participation rate has leveled out. As noted in the FOMC statement, “unde rutilization of labor resources continues to diminish.” Even so, there is room for further improvement, with too many people who want jobs being unable to find them, too many who are working part time but would prefer Page 1 of 23 full-time work, and too many who have given up searching for a job but would likely do so if the labor market were stronger.
The Committee continues to see sufficient underlying strength in the economy to support ongoing improvement in the labor market. Real GDP looks to have increased robustly in the third quarter, reflecting solid consumption and investment spending. Smoothing through the quarterly ups and downs earlier this year, real GDP expanded around 2½ percent over the four quarters ending in the third quarter, and the available indicators suggest that economic growth is running at roughly that pace in the current quarter. The Committee continues to expect a moderate pace of growth going forward.