“Federal Reserve Vice Chair Janet Yellen said that U.S. interest rates may need to stay near zero until early 2016 to forcefully lift employment, and she strongly backed adopting inflation and unemployment thresholds to guide policy.
Yellen, viewed as a front-runner to succeed Fed Chairman Ben Bernanke when his term expires in January 2014, argued that an optimal path for U.S. monetary policy would keep rates on hold for longer than expected, at the cost of a bit more inflation.
“This highly accommodative policy path generates a faster reduction in unemployment than in the baseline, while inflation overshoots the (Fed policy) committee’s two percent objective for several years,” she told students at the Haas School of Business at the University of California, Berkeley.”
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