Reporter to Yellen: What Happened to Raising Rates at 6.5 Percent Unemployment?

‘We want to see the inflation rate get back to 2 percent’

RUSH TRANSCRIPT:

REPORTER: "Thank you. I want to pick it back on the question -- piggyback and bring up the question of five point threshold of unemployment and during the time you promise to keep interest rates low. That have assumed that the fed was comfortable with inflation rising about 2%. You just said you do not want to wait until inflation hits your target before you are ready to lift off. I wonder if you could explain that. How much should the fed is willing to accept.”

YELLEN: “2% is the objective. We want to see it go back to 2%. So we are not trying to push the inflation rate of both two. It is always the objective to get back to two. 2% is not a feeling. If it were a feeling, you would have to be conducting a policy that on average would hold the inflation rate below 2%. That is not our policy. We want to see the inflation rate get back to 2%. There are lives in the impact of monetary policy on the economy. If we waited until inflation is back to 2%, it would probably mean unemployment had declined well below our estimate of the natural rate. Only then did we start to begin to -- the word tighten monetary policy I don't think it's really right. We have an immensely accommodative monetary policy in place. Let me say to begin to diminish the extraordinary degree of accommodation for monetary policy. We would likely overshoot substantially our 2% objective, and we may be faced with then having to tighten policy in a way that could be disruptive to the real economy, and I don't think that's a desirable way to conduct policy."

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