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Wed March 19, 2014
In First Press Conference, New Fed Chair Goes Vague
Originally published on Wed March 19, 2014 5:59 pm
AUDIE CORNISH, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.
ROBERT SIEGEL, HOST:
And I'm Robert Siegel.
Federal Reserve policymakers say it's not your imagination, there has been an economic slowdown over the past few months. The pullback was partly due to the harsh winter weather. And today was Fed chair Janet Yellen's first opportunity to face the Washington press corps at the end of a two-day meeting.
As NPR's Yuki Noguchi reports, Yellen was closely watched by investors who were wondering when interest rates might start to rise.
YUKI NOGUCHI, BYLINE: The statement released by Fed policymakers today did not contain many surprises. As expected, it said it would continue to reduce the amount of its bond-buying stimulus program to $55 billion a month. It also pledged to keep key interest rates very low, quote, "for a considerable time" after its stimulus program ends. So in content and tenor, Yellen's press conference struck a largely familiar tone.
JANET YELLEN: The committee's actions today reflect its assessment that progress in the labor market is continuing but that much remains to be done on both the jobs and inflation fronts.
NOGUCHI: But at the helm of the central bank, much is made not only of what is said, but how it is said. Vague, inscrutable statements were a hallmark of the Alan Greenspan era. Previous Fed chair Ben Bernanke took a different tack. He started holding press conferences in a pledge to make the famously private institution more transparent. And by her own admission, Yellen, who has worked in the Fed system as vice chair and president of the San Francisco Fed, is not looking to make radical changes either in style or in policy from the Bernanke days.
YELLEN: In terms of the conduct of business, it's pretty much the same as usual.
NOGUCHI: The big change out of the two-day meeting had to do with what's known as forward guidance. Instead of using an unemployment rate of six and a half percent as a benchmark for when to raise interest rates, the Fed will shift to a broader array of economic indicators, giving it greater flexibility going forward. Yellen defended the change, saying it makes more sense to set expectations about interest rates based on qualitative assessments about inflation and unemployment, not by focusing on a specific member.
YELLEN: The question is, markets want to know, the public wants to understand, beyond that threshold, how will we decide what to do? So the purpose of this change is simply to provide more information than we have in the past.
NOGUCHI: But even trying to explain changes like these can be perilous. In trying to describe what the phrase a considerable time means, Yellen said this...
YELLEN: This is the kind of term it's hard to define but, you know, probably means something on the order of around six months or that type of thing.
NOGUCHI: The stock market dipped. Trying to gauge whether Yellen's characterization of on the order of six months meant interest rates would rise sooner than previously expected. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.