Inflation will reach 2% in 2019 and stay there in 2020, after getting close in 2018, Federal Reserve Board Chair Janet Yellen said during a press conference Wednesday afternoon.
“Inflation will move higher,” she said, predicting it will “stabilize around 2% over the next couple of years.”
She summarized Fed projections by saying GDP is expected to be “a touch stronger” than projected in June while inflation is seen as “softer this year and next.”
Third quarter growth will show the effects of Hurricanes Harvey, Irma and Maria, but will bounce back quickly, Yellen said.
She repeated that “gradual rate hikes are warranted” but are “not on a pre-set course.” Interest rates “will stay below levels from previous decades.”
A “significant negative shock” could “force us down to the so-called zero lower bound,” but the plan would to be to use the federal funds rate to tighten monetary policy rather than end the balance sheet reduction. “That's our go-to tool.” But other tools could be used if needed.
On her future at the Fed, Yellen said she plans to serve out her term as chair but wouldn’t comment further and hasn’t met with President Trump recently.
When asked about the empty seats on the Federal Reserve Board and the lack of a quorum, Yellen said, “I have full confidence” the Board will not be hindered in its ability to work with just three governors.