Federal Reserve press conference, 2014-06-18 — Chair Janet Yellen

Question (Donna Borak, American Banker): Madam Chair, Donna Borak with American Banker. One of the outstanding reform issues on the plate of the Fed is to handle the risk related to short-term wholesale funding. You’ve been very supportive of this issue, but we’ve really heard little progress so far on where things stand. Can you please explain to us why it’s taken so long to get this proposal out? What are some of the aspects that the Fed is considering in their approach to how they roll out this rule, and where we may be in that process? Thank you.
Answer: So I’m afraid that I can’t give you a detailed timetable for when we will move forward with that rule. I’ve been supportive, Governor Tarullo and others have been supportive, of taking some action to diminish the incentives for heavy reliance on short-term funding. We still see that as one of the risks to the financial system that wasn’t really addressed in the risk-based capital requirements that we put out or in the liquidity coverage ratio that’s out for proposal. Governor Tarullo has suggested one approach could be to impose a capital requirement that’s related to reliance on wholesale funding, and in my own past comments, I’ve been supportive, but I’m afraid at this point—and this remains very much on the table to take some action to address this—it certainly remains on the table as an unfinished agenda item, but I don’t have a detailed timetable for you.

Question (Michael McKee, Bloomberg): Michael McKee from Bloomberg Television and Radio. I’d like to ask you about your signaling mechanism going forward. At this point you haven’t decided on reinvestments. You’ve told people, don’t pay any attention to the dot plot, and your two mandates, inflation and unemployment, are backward-looking lagging indicators. So, if something should surprise in the economy with only four SEPs and press conferences a year, how do you signal to the markets what the Fed is doing so that you don’t run the risk of an event like last September when people were surprised, or some sort of credibility problem where people feel you’re falling behind the economy?
Answer: Well, you know, again, we are very attentive to unfolding economic developments and understand that there can be surprises and twists and turns in the road, so that the forecasts that we’ve made become no longer appropriate and we need to respond to unfolding developments. I’m personally committed to communicating with the public whenever communication is appropriate. We have four press conferences, but I would feel it appropriate for me to either have additional communications meetings with the press or to give speeches or to, in a variety of opportunities I have, to make clear what the Committee’s thinking is, and my colleagues as well, I think, would feel it entirely appropriate to communicate changes—changes in our views.