WASHINGTON — Federal Reserve Chair Janet Yellen navigated the tricky job of managing expectations Tuesday in her first public comments on interest rate policy in more than two months.
She wanted the world to know the Fed isn’t ready yet to raise rates from record lows. The job market is still healing, and inflation is too low, she said. At the same time, Yellen signaled that the Fed is moving closer to a rate hike by sketching the steps the central bank would take when it deemed the time was right.
In delivering the Fed’s semiannual economic report before the Senate Banking Committee, Yellen tried to balance the public’s thirst for information on the Fed’s future plans.
The Fed has two mandates: maximum employment and price stability. The problem Yellen faces now is that the two measures are heading in opposite directions.
Yellen told lawmakers that the U.S. economy is making steady progress toward what the Fed defines as “maximum employment” — an unemployment rate between 5.2 percent and 5.5 percent. Yellen, however, noted that the labor market had not totally healed, in large part because wage growth has been weak.
“The Fed is trying to manage a difficult situation in dealing with the uncertainty surrounding the economic outlook,” said Paul Edelstein, director of financial services at Global Insight.
