YELLEN: The Fed is focused on allowing the economy to 'coast and remain on an even keel'

Eight years after the worst financial crisis since the Great Depression, the Federal Reserve is focused on allowing the economy to maintain its gains from the recovery, according to Chair Janet Yellen.

Yellen spoke Monday at an event hosted by the University of Michigan’s Ford School of Public Policy.

“With the economy operating close to our objectives, what we want to make sure of is that we sustain the progress that we have achieved,” Yellen said.

“Before, we had our foot pressed down on the gas pedal trying to give the economy all the oomph we possibly could.” The Fed is “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’re pressing down on the accelerator. That’s a better stance of monetary policy.”

The Fed raised its benchmark interest rate for the third time in this economic cycle in March. The minutes of that policy meeting published last week showed Fed officials were in favour of, later this year, changing the policy on reinvesting the bonds they amassed after the crisis, so that the $US4.5 trillion balance sheet can start to shrink.

“I simply could not have imagined that it would be as long as it turned out to be, which was seven full years,” Yellen said about having to keep interest rates near zero to heal the economy.

Yellen said the unemployment rate, which fell to a postrecession low of 4.6% in March, was at a point that she and her colleagues considered “equilibrium.”

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