September 21, 2016
JYJanet L. YellenSeptember 21, 2016 FOMC Press Conference
- The chair said the median projection for the federal funds rate rises to 1.1 percent by end-2017, 1.9 percent by end-2018, and 2.6 percent by end-2019, with the median longer-run normal rate marked down to 2.9 percent.
- She said the economy has "a little more room to run than might have been previously thought," citing increased labor force participation and a rising employment-to-population ratio as evidence people are being drawn back into the labor market.
- She said that if the economy continues on its current course with labor market improvement and no major new risks, she would expect one increase in the federal funds rate this year.
- She said the decision to wait was partly because the economy is not overheating and that the strong labor market is attracting people from outside the labor force, which is "good to see" and reduces pressure on utilization.
- She said that partisan politics plays no role in Fed decisions, responding to a charge that the Fed is keeping rates low to support the Obama administration, and that the Fed was established as an independent agency to insulate policy from short-term political pressures.
From the opening statement
Press conference
CHAIR YELLEN. Good afternoon. At our meeting that concluded earlier today, my colleagues and I on the Federal Open Market Committee discussed overall economic conditions and decided to keep the target range for the federal funds rate at ¼ to ½ percent. We judged that the case for an increase has strengthened but decided for the time being to wait for further evidence of continued progress toward our objectives. Our current policy should help move the economy toward our statutory goals of maximum employment and price stability. I’ll have more to say about our decision shortly, but first I will review recent economic developments and the outlook.
Economic growth, which was subdued during the first half of the year, appears to have picked up. Household spending continues to be the key source of that growth. This spending has been supported by solid increases in household income as well as by relatively high levels of consumer sentiment and wealth. Business investment, however, remains soft, both in the energy sector and more broadly. The energy industry has been hard hit by the drop in oil prices since mid-2014, and investment in that sector continued to contract through the first half of the year. However, drilling is now showing signs of stabilizing. Overall, we ex pect that the economy will expand at a moderate pace over the next few years.
Turning to employment, job gains averaged about 180,000 per month over the past four months, about the same solid pace recorded since the beginning of the year. In the longer run, that’s well above the pace that we estimate is needed to provide work for new entrants in the job market. But so far this year, most measures of labor market slack have shown little change. The unemployment rate in August—4.9 percent—was the same as in January. And a broader measure of unemployment has also flattened out —a measure that includes people who want and are available to work but have not searched recently as well as people who are working part time but would rather work full time. The fact that unemployment measures have been holding steady while the number of jobs has grown solidly shows that more people, presumably in response to better employment opportunities and higher wages, have started actively seeking and finding jobs. This is a very welcome development, both for the individuals involved and the nation as a whole. We continue to expect that labor market conditions will strengthen somewhat further over time.