Inflation will begin to move up toward 2%: Yellen

Economic activity will expand at a somewhat faster pace this year than it did last year and the unemployment rate will continue to decline gradually, Yellen says

May 08, 2014 8:15 IST | India Infoline News Service
Federal Reserve Chair Janet Yellen said Wednesday that the US economy is improving but noted that the job market remains "far from satisfactory" and inflation still below the Fed's target rate.

Speaking to Congress' Joint Economic Committee, Yellen said that as a result, she expects low borrowing rates will continue to be needed for a "considerable time."
Looking ahead, I expect that economic activity will expand at a somewhat faster pace this year than it did last year, that the unemployment rate will continue to decline gradually, and that inflation will begin to move up toward 2%, Yellen added.
According to Yellen, “Our policy will continue to be guided by the evolving economic and financial situation, and we will adjust the stance of policy appropriately to take account of changes in the economic outlook.”

Below are the excerpts of Janet Yellen speech:
The economy has continued to recover from the steep recession of 2008 and 2009. Although real GDP growth is currently estimated to have paused in the first quarter of this year. Conditions in the labor market have continued to improve. The unemployment rate was 6.3 percent in April, about 1-1/4 percentage points below where it was a year ago. 
Inflation has been quite low even as the economy has continued to expand. Some of the factors contributing to the softness in inflation over the past year, such as the declines seen in non-oil import prices, will probably be transitory. Importantly, measures of longer-run inflation expectations have remained stable. That said, the Federal Open Market Committee (FOMC) recognizes that inflation persistently below 2 percent--the rate that the Committee judges to be most consistent with its dual mandate--could pose risks to economic performance, and we are monitoring inflation developments closely.
The Federal Reserve works to promote financial stability, focusing on identifying and monitoring vulnerabilities in the financial system and taking actions to reduce them.
The Committee recognizes that an extended period of low interest rates has the potential to induce investors to "reach for yield" by taking on increased leverage, duration risk, or credit risk.

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