FOMC Press Conference June 15, 2016

TL;DR

Chair Yellen maintains cautious approach to monetary policy, keeping interest rates steady due to mixed economic indicators, concerns about global economy, and below-target inflation.

Transcript

Transcript of Chair Yellen's Press Conference June 15, 2016 CHAIR YELLEN. Good afternoon. Today, the Federal Open Market Committee maintained the target range for the federal funds rate at 1/4 to 1/2 percent. This accommodative policy should support further progress toward our statutory objectives of maximum employment and price stability. Based on... Read More

Key Insights

• 🌐 The Federal Reserve maintains a cautious approach to monetary policy and is closely monitoring economic indicators and global economic and financial developments.
• ☠️ Increases in the federal funds rate will be gradual and dependent on continued improvements in the labor market and inflation towards the 2% target.
• ☠️ The neutral rate, or rate consistent with full employment and trend growth, is low by historical standards, and this influences the projected path of future interest rate increases.
• 😮 Inflation is expected to rise to 2% over the next few years as transitory factors fade and labor market conditions improve further.
• 😘 The impact of low and negative interest rates in other countries is considered in determining the appropriate stance of U.S. monetary policy.

Questions & Answers

Q: How does Chair Yellen view the impact of the upcoming Brexit vote on the U.S. economy?

Chair Yellen acknowledges that the U.K. decision to leave the European Union could have consequences for global financial markets and the U.S. economic outlook.

Q: What would it take for the Federal Reserve to consider two rate increases in the near future?

The Committee will closely monitor data on economic growth, labor market conditions, and inflation to determine the appropriate path for future rate increases.

Q: How does Chair Yellen view the recent slowdown in job growth and what would it take to convince her that the labor market is still moving towards full employment?

Chair Yellen expresses concern about the recent slowdown in job growth and states that the Committee will be looking for an adequate pace of job creation and other indicators of labor market strength.

Q: Is increasing the federal minimum wage a viable option for boosting higher wages and inflation?

Chair Yellen believes that increasing the federal minimum wage may have a minor influence on aggregate wage inflation and that faster wage growth is more indicative of a healthy labor market.

Summary & Key Takeaways

• Chair Yellen acknowledges weak economic growth in late 2015 and early 2016, attributing it to soft exports and a decline in energy sector activity.

• Despite the slowdown, the job market continued to improve, although recent labor market data suggests a marked slowing of job gains.

• Inflation remains below the 2% target, but Chair Yellen expects it to rise as transitory factors fade and the labor market strengthens further.