Federal Reserve press conference, 2015-03-18 — Chair Janet Yellen

Question (Steve Liesman, CNBC): Can I have the second part about the balance of risks—would you raise rates when risks are balanced?
Answer: Well, I guess we said the risks to the outlook are balanced. And, I mean, certainly we could raise rates in a situation where the risks are balanced. We need to see, as we have said, we want to see further improvement in the labor market, and we want to feel reasonably confident that the economy is on a trajectory where we will achieve our 2 percent inflation objective.

Question (Pedro Da Costa, Dow Jones Newswires): If I could follow up on his question. I think when you get asked about financial crimes and the public hears you talk about compliance, you get a sense that there’s not enough enforcement involved in these actions, and that it’s merely a case of kind of trying to achieve settlements after the fact. Is there a sense in the regulatory community that financial crimes need to be punished sort of more forcefully in order for them to be—for there to be an actual deterrent against unethical behavior?
Answer: So, the—you’re talking about within banking organizations? So, the focus of regulators—the banking regulators—is safety and soundness, and what we want to see is changes made as rapidly as possible that will eliminate practices that are unsafe and unsound. We can’t—only the Justice Department can bring criminal action, and they have taken up cases where they think that that’s appropriate. In some situations, when we are able to identify individuals who were responsible for misdeeds, we can put in place prohibitions that bar them from participating in banking, and we have done so and will continue to do so.

Question (Steven Beckner, MNI): Steve Beckner of MNI. Good afternoon, Madame Chair. The FOMC said last September that it will wait ‘til after the first rate hike to stop or to discontinue reinvesting proceeds of its MBS holdings and stop rolling over maturing Treasuries. What is the FOMC’s current thinking about how long after liftoff you should wait to stop reinvestments and rollovers? And, given the very large amounts of Treasuries maturing next year, would it make sense for the FOMC to vary the pace of runoff that it allows?
Answer: So, we issued in September a set of normalization principles, and, as you noted, the Committee indicated that we will eventually cease reinvestments or diminish the pace of reinvestments as a way of gradually reducing the size of our portfolio over time. We said we would do that when economic conditions were appropriate after we begin raising rates, because we want changes in the—our target range for the federal funds rate to be the main tool by which we shift the stance of monetary policy. We’ve not made any decision at this point about how long it will be, once we begin to raise rates, before we reduce or cease reinvestment. We will see how things go, and the Committee will revisit that and make a decision at a later time. You also indicated that we have a substantial quantity of Treasuries that will roll off our balance sheet over the next several years. That’s true, and that will—I think, over the next two years, almost $800 billion will mature—and that they will be short-term, obviously, Treasuries at that point, and that’s a way in which we anticipate diminishing the size of our portfolio.