March 18, 2015 FOMC Press Conference

Press conference

CHAIR YELLEN. Good afternoon. As you know, the Federal Open Market Committee this afternoon reaffirmed the current 0 to ¼ percent target range for the federal funds rate. We also updated our forward guidance, indicating that an increase in the target range for the federal funds rate remains unlikely at our next meeting in April. With continued improvement in economic conditions, however, we do not want to rule out the possibility that an increase in the target range could be warranted at subsequent meetings. Let me emphasize, however, that the timing of the initial increase in the target range will depend on the Committee’s assessment of incoming information. Today’s modification of our guidance should not be interpreted to mean that we have decided on the timing of that increase. In other words, just because we removed the word “patient” from the statement doesn’t mean we are going to be impatient. Moreover, even after the initial increase in the target funds rate, our policy is likely to remain highly accommodative to support continued progress toward our objectives of maximum employment and 2 percent inflation. I’ll come back to today’s policy decisions in a few moments, but first I would like to review economic developments and the outlook, which formed the basis for our policy decisions.

We have seen continued progress toward our objective of maximum employment. The pace of employment growth has remained strong, with job gains averaging nearly 290,000 per month over the past three months. The unemployment rate was 5.5 percent in February; that’s three-tenths lower than the latest reading available at the time of our December meeting. Broader measures of job market conditions—such as those counting individuals who want and are available to work but have not actively searched recently and people who are working part time but would rather work full time—have shown similar improvement. As we noted in our statement, slack in the labor market continues to diminish. Meanwhile, the labor force participation rate—the percentage of working-age Americans either working or seeking work— is lower than most estimates of its trend, and wage growth remains sluggish, suggesting that some cyclical weakness persists. So considerable progress clearly has been achieved, but room for further improvement in the labor market continues.

We continue to expect sufficient underlying strength in economic growth to support ongoing improvement in the labor market. After averaging about 2½ percent over 2014, growth of real gross domestic product appears to have slowed in the first quarter of this year, in part reflecting a moderation in household spending. In addition, the recovery in the housing sector remains subdued, and export growth looks to have weakened. Looking ahead, however, the Committee continues to expect a moderate pace of GDP growth, with robust job gains and lower energy prices supporting household spending.