19 January, 2017

After lying low for a few weeks, Fed Chair Janet Yellen returned to center stage on Wednesday, talking about the future course of the US economy and offering rather frank views about the future trajectory of interest rates. Yellen stated that it now “makes sense” for the central bank to gradually lift interest rates and that by “waiting too long to begin moving toward the neutral rate [we] could risk a nasty surprise down the road - either too much inflation, financial instability, or both. In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession” Yellen was quoted as telling a San Francisco audience. However, there was an element of doublespeak in her remarks as well; the Fed chair noted that “our foot remains on the pedal in part because we want to make sure the economic expansion remains strong enough to withstand an unexpected shock, given that we don’t have much room to cut interest rates”