Sal Guatieri, senior economist at BMO Capital Markets, said while Yellen sounded a bit more upbeat about the economy in her panel appearance “she reaffirmed that some lingering slack in the labor market, global and financial risks and the limited scope for easing to address adverse shocks warrants a cautious approach to normalizing rates”. He says economies go up and down and that’s natural.
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The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending April 2 decreased by 9,000 to 267,000 from the previous week’s total of 276,000.
Federal Reserve Chair Janet Yellen lauded the strength of the USA economy Thursday, brushing aside concerns that the economy was moving into risky territory of overvalued assets that caused the 2007-09 recession.
In a speech that carefully weighed overseas threats against expectations of further domestic growth, New York Fed President William Dudley said risks are “slightly” tilted to the downside. “All the Fed can do is try to do the right thing”.
In December, the Fed raised its key short-term rate modestly from record lows but has since kept it unchanged.
The decision was not a mistake Ms Yellen insisted, despite suggestions that the increase in rates had excarcebated the financial market turbulence which characterised the start of 2016.
But he argued that the process would not be “terribly problematic”, and that numerous supposed menaces associated with the stimulus efforts – including hyperinflation and a crashing dollar, had not come to pass. He added that he did not believe the Fed was out of ammunition if a renewed downturn occurred, although he said fiscal policy would need to carry some of the burden.
Although Ms. Yellen is confident in the stability of the economy, she reaffirmed that Fed is in no hurry to tighten monetary policy, under the uncertain global economy.
She has said America’s on a solid course and suggested the economy would be able to withstand gradual rate rises this year.
She said the Fed would at some point take steps to shrink its $4.5 trillion balance sheet, but she didn’t say when that would happen.
Further, members also considered the scope for introducing an exemption scheme for the deposit facility rate applicable to banks’ holdings of excess reserves, the minutes said.
Largely absent from the evening was questioning about the Fed’s oversight of the booming financial system and hazardous mortgage lending in the lead-up to the financial crisis.
Kashkari has made addressing the issue of too-big-to-fail banks a goal this year at the Minneapolis Fed.
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“I think the major problem that exists is essentially the issue that productivity growth across the spectrum of all economies has been under 1% a year for the last five years”, said Greenspan.
