Monetary policy accommodation is at an appropriate level, and when combined with Fed moves to hike liquidity should help financial conditions improve and avoid stagflation, according San Francisco Federal Reserve Bank president Janet Yellen.

“I believe that the Fed’s liquidity operations, combined with its 325-basis-point cut in the federal funds rate — a substantial easing of monetary policy — are having a beneficial effect on financial markets,” she said according to prepared text of a speech she delivered at the Northern California Regional Financial Planning Conference yesterday.

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