The U.S. economy is on a solid course with some hints of inflation so the Federal Reserve is on track for further interest rate hikes, Federal Reserve Chair Janet Yellen said in a defence of her decision to tighten policy late last year.
In a rare spectacle, Ms. Yellen spoke on a New York panel alongside her three predecessors who ran the world’s most powerful central bank. She said that, seven years after the brutal financial crisis, the U.S. labour market was now “close” to full strength, again arguing that inflation would not be held down much longer by the strong dollar and low oil prices.
“The U.S. economy has continued to progress in a satisfactory way. We continue to see good job performance, some evidence of inflation moving up, so that was our expectation when we raised rates in December,” she said at the International House, a New York non-profit residence for students.
“So yes, there is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate,” Ms. Yellen added. “We remain on a reasonable path and I don’t think December was a mistake.”
The Fed raised its benchmark policy rate in December, the first increase in nearly a decade, to between 0.25 per cent to 0.5 per cent.
Ben Bernanke and Paul Volcker joined the current Fed chair at the conference, and Alan Greenspan appeared via teleconference screens next to the stage. Between the four of them, they ran the Fed for a third of its 102-year history.
This included Mr. Volcker’s taming of the 1970s runaway inflation, and Mr. Greenspan’s 18-year run of relative economic stability.