Fed Yellen: Even after this increase monetary policy remains accommodative

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 16, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - Federal Reserve Yellen offered a press conference following the FOMC unanimous decision to raise rates target to 0.25%-0.50%, the first hike since the crisis began. Yellen however pointed that even after this increase monetary policy remains accommodative.

    Key remarks

    This action marks the end of an extraordinary 7-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression.

    With the economy performing well, and expected to continue to do so, the committee judged that a modest increase in the federal funds rate target is now appropriate, recognizing that even after this increase, monetary policy remains accommodative.

    Two criteria set by FOMC for raising rates have been satisfied.

    Move recognises considerable progress in the economy.

    Developments abroad still pose risks to US growth but have lessened.

    Room remains for further labour market improvement.

    Some cyclical weakness remains in labour market.

    Wage growth needs to show pickup; participation still below trend.

    Much of inflation shortfall from goal reflects energy prices decline. Recent softness in inflation is due to transitory factors.

    Fed funds rate projected to rise by the end of 2018 close to normal long-run level.

    Exports subdued by weaker global environment and strong dollar; spending expansion has offset this.

    Importance of initial hike should not be overstated.

    The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate.

    The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.

    Stronger growth or faster inflation would make steeper hikes appropriate.

    Fed recognises that it takes time for policy action to have an impact.
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