Janet Yellen is repeating that this year's downdraft in inflation is likely temporary, the result of one-time factors though she nevertheless concedes the dip is a bit of a "mystery" that the FOMC doesn't fully understand. She expects inflation to move higher and stabilize around the FOMC's 2 percent goal though she conceded here too that there are risks that inflation may continue to run below 2 percent. Yet, citing history, she said tightness in the labor market tends to push up wages over time and with that price inflation along with it.
On balance-sheet unwinding which is set to begin next month, the chair does not see any adjustments outside of the scheduled path. Yet should the economy significantly deteriorate, she said the FOMC could change reinvestment caps, stop rolloffs or resume reinvestment. Barring significant change, however, she prefers to use the federal funds rate as the primary tool to recalibrate policy.
On employment, she is pleased with progress and describes the 4.4 percent level as "quite low" and notes special progress among minorities who were hit hardest after the financial crisis. On her own future, Yellen said the intends to serve out her term as chair which ends January 31 next year. Even if she is not renominated, she could still stay on as a governor until her 14-year term expires in 2024.