Even as a number of indicators point to better economic times ahead, the chairwoman of the Federal Reserve, Janet L. Yellen, reiterated on Wednesday that she expected interest rates to remain very low until the recovery is on a more secure footing and the American economy is more fully involving available workers and other resources.
In one of her first major public speeches since assuming the top job at the Fed in February, Ms. Yellen said that while “the recovery has come a long way” — citing a rebounding housing sector and a resurgent auto industry as examples — a robust and healthy job market still appeared to be “more than two years away.”
As a result, she said, the central bank believed that “economic conditions may, for some time, warrant keeping short-term interest rates below levels” that are “likely to prove normal in the longer run.” Her speech seemed intended, in part, to clarify her remarks last month during her first news conference as Fed chairwoman that suggested the central bank might begin to lift rates as early as the middle of 2015. In her speech, which was given to the Economic Club of New York, Ms. Yellen also said that the risk of inflation rising above the Fed’s 2 percent target remained less of a threat than the danger posed by too little inflation. She emphasized that even as the headline unemployment rate, now at 6.7 percent, has been falling, other measures of the job market’s health — like the number of people forced to take part-time positions because they can’t find full-time work, the still-sizable ranks of the long-term unemployed and the proportion of the population that has dropped out of the work force entirely — all point to weakness.