What did the Fed Chairman Yellen on the 26th of September?
Inflation is the topic of Yellen’s speech and his position is mixed. It said that inflation uncertainty has led to a slow increase in rate. Although, the gradual increase may lead to overheating of the labour market and, in turn, to inflationary pressures. Yellen repeated her previous comments that the effect of low inflation this year is likely due to the one time «special» factors, such as lower prices for cell phone services earlier in the year. Yellen also reiterated that it expects inflation to return to the norm. This is due to the labour market by stepping up more. And with it, the demand for higher wages start to increase. Although this seems to tighten the Fed, it also warns that many uncertainties remain and that inflation remains low. Here, she points out that weak wage growth is linked to low productivity growth. It also suggests a continuation of the low wages of the period. The Federal Reserve puts a special emphasis on inflation expectations. Here, it is also noted that the expectations have «declined slightly» in the past 2-3 years. This can make achieving the two per cent of the FOMC meeting inflation target more difficult. However, Yellen offers a harsh note again, saying that it would be imprudent to pursue a monetary policy in waiting, until the return of inflation to two percent. There are two sides at the same time in its comments. The door is always open. Will the FOMC raise rates again this year?
The last note about the reduction of the balance sheet of the Fed, which will begin next month. Although the Fed is expected to still preview of where this is going to go. Yellen noted this in the questions and answers that the current balance of $ 4.5 trillion will be higher than its level at the time of the crisis in 2008, which is about $ 1 trillion.