Federal Reserve press conference, 2015-09-17 — Chair Janet Yellen

Question (Greg Robb, MarketWatch): Greg Robb from MarketWatch. I want to see if you would shift gears a little bit and talk about the housing market. You say in the statement, the housing market has improved. How much are you counting on the housing market for growth going forward, especially since the Committee sees rates rising? Thanks.
Answer: So we are envisioning further improvements in the housing market. It remains very depressed—housing starts below levels that seem consistent with underlying demographics, especially in an economy that’s creating jobs, and we have lots of people who are still doubled up, and demand for housing should be there and should materialize as the job market improves and income growth improves. So, are we counting on it? Housing is now a very small sector of the economy. It is not the driver of—it is not the key driver in my own forecast of ongoing improvements in the U.S. economy. It plays a supporting role, but consumer spending is the main driver, bolstered by, you know, a decent outlook for investment spending. But I would continue to expect housing to improve. And, remember, we’re envisioning, if things go as we anticipate, a pretty gradual path of increases in short-term interest rates over time. To some extent, that’s already embodied in longer term rates. On the other hand, as time passes and we move beyond the window in which short rates are zero, it will be natural for long rates to rise some. And, of course, we recognize that the housing market is sensitive to mortgage rates. It’s a—it is an important factor. But that’s something that, of course, we are taking into account in thinking about what’s the appropriate path of policy.

Question (Nancy Marshall-Genzer, Marketplace): Nancy Marshall-Genzer with Marketplace. You mentioned you’ve gotten a lot of unsolicited advice—the folks outside. But there is another side that says the Fed should raise interest rates because keeping rates so long—so low for so long has actually exacerbated the wealth gap. Do you think the Fed has widened the wealth gap with its low interest rate policy? These people say low interest rates mainly benefit the wealthy.
Answer: Well, I guess I really don’t see it that way. It is true that interest rates affect asset prices, but they have a complex effect through balance sheets, through liabilities and assets. To me, the main thing that an accommodative monetary policy does is put people back to work. And since income inequality is surely exacerbated by a high—having high unemployment and a weak job market that has the most profound negative effects on the most vulnerable individuals, to me, putting people back to work and seeing a strengthening of the labor market that has a disproportionately favorable effect on vulnerable portions of our population, that’s not something that increases income inequality. There have been a number of studies that have done—been done recently that have tried to take account of many different ways in which monetary policy, acting through different parts of the transmission mechanism, affect inequality. And there’s a lot of guesswork involved, and different analyses can come up with different things. But a pretty recent paper that’s quite comprehensive concludes that Fed policy has not exacerbated income inequality.