The U.S. financial situation “deteriorated” since the most recent Federal Open Market Committee meeting in October, causing Federal Reserve Bank of San Francisco president Janet L. Yellen to reconsider projections for growth.
Yellen supported the recent FOMC moves as “forward-looking and preemptive,” she told the Seattle Community Development Roundtable and Chamber of Commerce Board of Trustees late Monday, according to prepared text of the speech released by the Fed.
“In particular, I supported putting a substantial easing in place so as not to fall behind the curve,” she said. “Given the long lags between policy actions and their impact on the economy, and the possibility that economic downturns can be difficult to reverse once they take hold, an approach that was more gradual and reactive than this would have created unnecessary economic risks.”
But Yellen added: “Since the October FOMC meeting, financial conditions have deteriorated, and we have seen some unexpected softening in the economic data. These developments necessitate some rethinking of my growth forecast, and have highlighted the downside skew in the risks to that forecast. On the inflation front, I continue to expect core consumer prices to rise at a pace that is broadly consistent with price stability, although there are some notable upside risks that bear careful watching and consideration. Additional data bearing on the outlook will become available before the FOMC’s meeting next week, and this information must also be factored into an assessment of the economy’s prospects.”