{"id":7750,"date":"2015-02-24T12:25:13","date_gmt":"2015-02-24T18:25:13","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=7750"},"modified":"2015-02-24T19:15:04","modified_gmt":"2015-02-25T01:15:04","slug":"yellen-labor-market-not-ready-for-interest-rate-hike","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/yellen-labor-market-not-ready-for-interest-rate-hike\/","title":{"rendered":"Yellen: Labor Market not Ready for Interest Rate Hike"},"content":{"rendered":"

By Lucy Ren<\/p>\n

\u201cThings have improved notably but we are not there yet,\u201d Federal Reserve Chairwoman Janet Yellen said during the semiannual monetary policy report to Congress on Tuesday, as she reiterated the \u201cpatient\u201d guidance on when the Fed will begin to raise the short-term interest rate.<\/p>\n

Testifying before the Senate Banking Committee, Yellen said the labor market has not \u201cfully healed yet.\u201d She raised the concern that tightening the monetary policy with a rate hike now would hamper further recovery. \u201cBut monetary policy is highly accommodative,\u201d Yellen added.<\/p>\n

Some Republican senators\u00a0argued that an interest rate hike is long overdue. Senator Pat Toomey (R-Pa.), Yellen\u2019s most resistant critic on the committee, asserted that the financial crisis is \u201cclearly long over,\u201d and urged for normalization for monetary policy.<\/div>\n

<\/p>\n

RELATED: Senator Challenges Yellen on Interest Rate. Full Story.<\/a><\/div>\n

Yellen said important progress has been achieved toward the Federal Open Market Committee\u2019s objective of maximum employment, but inflation is still \u201cwell-below the longer-run objective\u201d and wage growth remains \u201csluggish.\u201d<\/p>\n

\"The<\/a>
The growth of the U.S. average hourly earnings was described as \u201csluggish\u201d by Federal Reserve Chairwoman Janet Yellen, leaving room for further recovery of the labor market. (Bloomberg, Lucy Ren\/Medill)<\/figcaption><\/figure>\n

In December and January, the FOMC judged that it can be \u201cpatient\u201d in beginning to raise the short-term rates, Yellen stated. \u201cThis judgment reflects the fact that inflation continues to run well below the Committee\u2019s 2 percent objective, and that room for sustainable improvements in labor market conditions still remains.”<\/p>\n

Yellen said\u00a0the FOMC\u2019s assessment that it can be patient in beginning to normalize policy means that \u201cthe Committee considers it unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings.\u201d The target range for the past six years has been 0-0.25 percent.<\/p>\n

The FOMC meetings will consider an increase in the target range for the short-term rate on \u201ca meeting-by-meeting basis,\u201d she said. The forward guidance will be altered before the rate hike takes place. At the same time, Yellen emphasized that \u201ca modification of the forward guidance should not be read as indicating that the Committee will necessarily increase the target range.\u201d<\/p>\n

In the most recent FOMC minutes, many Fed officials favored delaying the interest rate hike to after midyear. Yellen said raising the interest rate too soon would lead to the \u201crisk of undermining a recovery taking hold.”<\/p>\n

In\u00a0her testimony, Yellen also opposed the proposed legislation to\u00a0\u201caudit the Fed.\u201d She emphasized the importance of the Fed’s being \u201cfree of short-term political pressure,\u201d in order to \u201cdeliberate the best way to meet the responsibilities that Congress has assigned\u201d to it, which are sustaining maximum employment as well as price stability.<\/p>\n

Stocks\u00a0edged up\u00a0to all-time highs on Yellen\u2019s testimony. The Standard & Poor\u2019s 500 Index rose 0.28 percent to 2115.48.<\/p>\n

Photo at Top: The Federal Reserve Board Building in Washington, D.C. (Creative Commons)<\/div>\n","protected":false},"excerpt":{"rendered":"

By Lucy Ren \u201cThings have improved notably but we are not there yet,\u201d Federal Reserve Chairwoman Janet Yellen said during the semiannual monetary policy report to Congress on Tuesday, as she reiterated the \u201cpatient\u201d guidance on when the Fed will begin to raise the short-term interest rate. Testifying before the Senate Banking Committee, Yellen said […]<\/p>\n","protected":false},"author":29,"featured_media":7788,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,243],"tags":[],"class_list":["post-7750","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-winter-2015"],"yoast_head":"\nYellen: Labor Market not Ready for Interest Rate Hike - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/yellen-labor-market-not-ready-for-interest-rate-hike\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Yellen: Labor Market not Ready for Interest Rate Hike - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Lucy Ren \u201cThings have improved notably but we are not there yet,\u201d Federal Reserve Chairwoman Janet Yellen said during the semiannual monetary policy report to Congress on Tuesday, as she reiterated the \u201cpatient\u201d guidance on when the Fed will begin to raise the short-term interest rate. 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