Newsroom

April 11, 2017

Yellen: Fed should be 'ahead of the curve'

Federal Reserve Chair Janet Yellen on Monday said the Federal Open Market Committee wants to "be ahead of the curve and not behind it" in terms of raising interest rates appropriately.

"We don't want to be in a position where we have to raise rates rapidly, which could conceivably cause a recession," Yellen said in remarks at the University of Michigan, according to BloombergMarkets.

Yellen said the FOMC's policy is "closer to, let me call it neutral" as it transitions away from its post-financial crisis push to "give the economy all of the oomph that we possibly could."

NAFCU Chief Economist and Director of Research Curt Long said FOMC minutes from March indicate it hopes to "trim its balance sheet" this year.

"The March rate hike lent credibility to its median forecast of three quarter-point rate hikes this year, and the committee now believes that it can start trimming its balance sheet in 2017," Long said.

San Francisco Federal Reserve Bank President John Williams also said this week that he expects the Fed to raise interest rates three or four times this year. "It certainly makes sense that we position ourselves so that we are able to either pause or further increase toward the end of the year," Williams said, according to Reuters.

After its two-day March meeting, the FOMC announced it would raise the federal funds target rate a quarter-point to a range of 0.75 to 1 percent.

The FOMC had previously raised the federal funds target rate to a range of 0.5 to 0.75 percent last December.

The committee's revised projections are three quarter-point rate hikes in 2017, three in 2018 and three to four in 2019. The FOMC will meet next May 2-3.