Yellen’s Message: My Work Here Is (Mostly) Done

http://www.nytimes.com/2017/03/15/upshot/yellens-message-my-work-here-
BYNeil Irwin
MARCH 15, 2017
Photo Janet Yellen, in her news conference Wednesday, sounded like a central banker who is confident that the economy is heading in the right direction. Credit Al Drago/The New York Times

The economy will keep growing just enough to put more Americans back to work, but without overheating to generate excessive inflation. American workers will see gradual pay raises that keep compensation rising faster than inflation. Interest rates will rise gradually, while staying low by historical standards. And that’s all before accounting for any major stimulative policies that may emerge from the Trump administration and Congress.

That was the view of the economy sketched by the Federal Reserve chairwoman, Janet Yellen, at her first news conference of 2017 on Wednesday. In short, the Fed believes that after nearly eight years of trying to nurse the economy back to health, its work is nearly done.

The general sense of rosiness isn’t really anything new — for years, Ms. Yellen and her predecessor, Ben Bernanke, have forecast that the economy will steadily converge toward a Goldilocks-like state of being neither too hot nor too cold.

Two things have changed. First, that day now feels imminent, with the unemployment rate at 4.7 percent and inflation closing on the 2 percent the Fed thinks best. That is a key reason the Fed raised its interest rate target Wednesday. Second, markets now believe the Fed’s message that higher rates are on the way; bond markets suggest that the Fed will actually follow through with its intentions on gradual interest rate rises. You couldn’t say that a year ago.

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“The simple message is: The economy is doing well,” Ms. Yellen told reporters.

The overwhelming message was of gradualism — both on the rate of economic improvement and the Fed’s own efforts to wind down its era of low interest rates.

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