During an interview with CNBC on Thursday, Treasury Secretary Janet Yellen responded to a question on if she thinks the Federal Reserve has rates that are too high by stating that the Fed’s members expect rates to be cut and “when you have an economy that’s growing at potential, that’s operating at full employment, with inflation in the vicinity of the Fed’s target, that suggests that a more neutral stance of policy is appropriate.”
CNBC Senior Economics Reporter Steve Liesman asked, “I know you think a lot about the Fed. But I also know you don’t talk a lot about the Fed. So, I’ve written a carefully crafted question here to see if you might respond to it. When you think about the level of rates now relative to the progress on inflation, do you think that rates at the Fed are too high?”
Yellen responded, “Well, you do see in the material, in the comments of the chairman, and in the projections of the members, an expectation that rates will come down more and that short rates are currently above neutral, and when you have an economy that’s growing at potential, that’s operating at full employment, with inflation in the vicinity of the Fed’s target, that suggests that a more neutral stance of policy is appropriate. So, the Fed has had a policy of running a tight policy to bring inflation down. We’ve seen considerable progress on that front, and, yes, I believe, over time, if we stay on that path, that rates will decline toward neutral.”
Liesman then asked, “Do you have an opinion about the pace at which they ought to get there?”
Yellen answered, “That’s getting into details, that, clearly, it’s up to the Fed to decide that.”
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