The big development between the May FOMC and the June FOMC is the downgrade for inflation which Janet Yellen, in her quarterly press conference, cautioned may reflect noise in the economic data and also "one-off factors", specifically the sharp price drop in cell phone plans and also price declines for prescription drugs. But on the upside for inflation, Yellen pointed to the decline underway in the unemployment rate saying that the Phillip's curve "remains at work" and that overall inflation "will respond", though not very quickly, to changes in unemployment.
Yellen said a wide variety of data is pointing to labor market tightness, including household and business assessments of the jobs market, and she believes that wages are likely to move up. She said "removing a bit of accommodation" right now is prudent and will lower the risk that the FOMC, facing a sudden upturn in inflation, may in the future need to raise the funds rate quickly and thereby risk a recession.
Today's FOMC statement included the first details on plans to unwind the Federal Reserve's $4.5 trillion balance sheet though no time frames were given. If the economy improves as the FOMC expects, Yellen said the unwinding could begin "relatively soon" and last perhaps a few years. She did not offer a dollar level that the balance sheet would be brought down to, saying that will depend on bank demand for reserves. There's been no decision whether rate hikes may be combined, at the same meeting, with balance sheet actions and she noted, in theory, that the plan could be reversed if the economy moves lower. She hopes there will be very little market reaction once the program begins.
Yellen said she fully intends to serve out her term which, specifically as chair, expires in February next year. She said she has not had conversations with President Trump regarding her future at the Fed but she noted that the administration is "working hard" to fill the two open spots on the FOMC.