The Federal Reserve’s plans to raise U.S. interest rates gradually are aimed at sustaining full employment and near-2-percent inflation without letting the economy overheat, Fed Chair Janet Yellen said on Monday.
“I think we have a healthy economy now,” Yellen said at an event at the University of Michigan’s Ford School of Public Policy in Ann Arbor.
Unemployment, at 4.5 percent, is now a little bit below the jobless rate that most Fed officials think signals full employment, and inflation is “reasonably close” to the Fed’s 2-percent goal, she said. With the economy expected to continue to grow at a moderate pace, she said, the Fed is now shifting its focus.
“Whereas before we had our foot pressed down on the gas pedal trying to give the economy all the oomph we possibly could, now allowing the economy to kind of coast and remain on an even keel — to give it some gas but not so much that we are pressing down hard on the accelerator — that’s a better stance of monetary policy,” she said. “We want to be ahead of the curve and not behind it.”
In the U.S. Treasury bond market, yields were little changed after Yellen’s remarks.
The Fed raised rates in March for only the third time since the Great Recession, and most Fed officials expect the central bank to raise rates at least two more times this year.