Federal Reserve Chair Urges Cautious Rate Policy

Date: March 30, 2016 Last Edit: March 31, 2016

Yellen Says Federal Reserve Should Approach Potential Rate Hikes With Caution

On Tuesday, Federal Reserve Chairman Janet Yellen delivered a speech before the Economic Club of New York on current economic conditions. In the speech, she urged the Federal Reserve to move cautiously in raising interest rates, indicating an increase won’t emerge from an April meeting of the Fed’s policymaking committee. Bloomberg News says Yellen “made a strong case for running the economy hot to push away from the zero boundary for the Federal Open Market Committee’s target rate.” In her speech Yellen commented, “I consider it appropriate for the committee to proceed cautiously in adjusting policy. … This caution is especially warranted because, with the federal funds rate so low, the FOMC’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric.” According to the Washington Post, Yellen “expressed confidence that the US recovery remains on track,” even as she asserted that “the Fed will increase rates even more slowly than initially expected.” The New York Times says the “cautious tone” of Yellen’s speech suggested “no rate increase was likely” at the FOMC meeting next month, “shifting the eyes of Fed watchers to its subsequent meeting in June.”

What This Means For Small Businesses

Small businesses looking for a signal of the economy stabilizing and growing following the recession were disappointed yet again by Yellen’s comments, which reflect the “wait and see” attitude of the Fed. CNBC recently quoted NFIB Chief Economist Bill Dunkelberg as saying, “The major impact of Fed policy, or lack thereof, is basically producing immense uncertainty and no confidence. So people won’t put their money on the table, they won’t expand, they won’t hire.”

Additional Reading

The AP also covers Yellen’s comments.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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