Federal Reserve press conference, 2017-12-13 — Chair Janet Yellen

Question (Harriet Torry, Dow Jones Newswires): Harriet Torry with Dow Jones Newswires. You and others at the Fed have said that soft inflation should be transitory. Are you confident that that will still be the case, particularly regarding wage gains? They’ve been pretty moderate in recent months, yet the economy is growing and confidence is high. Is there something going on in the economy that’s making it difficult for businesses to raise wages?
Answer: So it is true that incoming wage data suggests only modest upward pressure on wages. That leaves me—that’s one factor, along with the fact that inflation remains low—with feeling that even though we have a 4.1 percent unemployment rate, that the labor market is not overheated at this point. Remember, the modest pace of wage gains also probably reflects slow productivity growth. But when you ask me about the outlook for inflation, you know, I’ve talked in detail about this in the past and recognize that there is uncertainty about what’s holding inflation down. But my colleagues and I continue to believe that the factors that are responsible this year for holding inflation down are likely to prove transitory. That said, we all agree that our inflation objective is extremely important. We recognize that there’s been a prolonged shortfall. This is a symmetric 2 percent inflation objective, and we continue to indicate that we’ll be monitoring inflation developments closely. And so this is on the horizon and recognized to be one of the risks facing policy.

Question (Howard Schneider, Reuters): Hi, Howard Schneider with Reuters. So you mentioned in response to Steve’s question that asset valuations, you didn’t think, were on the sort of high- priority risk list right now. So I’m wondering, what do you think is on that risk list? And, more broadly, what have you left undone? You’ve gotten high marks for bringing the economy back towards its goals, but are there things that are going to nag you when you walk out of here in February and say, “Really, I wish I’d seen this to completion”? I mean, we’re not doing negative interest rates. We’re not doing inflation framework. What’s at your top of—what’s at the top of the to-do list that you are not getting to see to bring to ground here?
Answer: So you asked about the risk list. There are always risks that affect the outlook. We tend to focus in our own evaluation on economic risks, and we’ve characterized them as “balanced.” And I think they are balanced. You know, I can always give you a list of, you know, potential troubles, international developments that could result in downside economic risk. But, look, at the moment the U.S. economy is performing well. The growth that we’re seeing, it’s not based on, for example, an unsustainable buildup of debt as we had in the run-up to the financial crisis. The global economy is doing well. We’re in a synchronized expansion. This is the first time in many years that we’ve seen this. Inflation around the world is generally low. So I think the risks are balanced, and there’s less to lose sleep about now than has been true for quite some time, so I feel good about the economic out—the economic outlook. I feel, you know, good that the labor market is in a very much stronger place than it was eight years ago. We have created 17 million jobs. We’ve got a good, strong labor market and a very low unemployment rate, and I think that’s been tremendously important to the well-being of American households and workers. And I feel very pleased when I hear anecdotes from firms that tell me they’re having a hard time finding workers, and they talk about, given that they’re taking on people with skills that don’t quite match what they want, but they’re training them, and, you know, giving them the training that they need in order to be able to fill jobs. I think that’s a development that is a natural one that occurs in a strong labor market that tends to build human capital and worker skills, and that that’s a strong positive. As I mentioned, I think the financial system is on much sounder footing, and that we have done a great deal to put in place greater capital, liquidity, and so forth that make it less crisis prone, and that has been an important objective. What’s on my “undone” list, you ask? We have a 2 percent symmetric inflation objective, and, for a number of years now, inflation has been running under 2 percent. And I consider it an important priority to make sure that inflation doesn’t chronically undershoot our 2 percent objective, and I want to see it move up to 2 percent. So most of my colleagues and I do believe that it’s being held down by transitory factors, but there’s work undone there, in the sense—we need to see it move up in line with our objective.