In comments that are not likely to turn up rate-hike expectations, Janet Yellen continues to elbow out a little room on whether the economy is or is not at full employment. In prior statements, she has described employment as "essentially" and "close to" full employment but in today's comments she questions whether the economy may be a "little below" full employment. Her comments may help ease concern that current tightness in the labor market is consistent with wage inflation. Her comments also, in some contrast, follow Friday's employment report where the unemployment rate fell a sharp 2 tenths to a 10-year low at 4.5 percent.
But in comments that do underscore the Fed's ongoing round of rate hikes, she warned that waiting to long to bring rates up to neutral could risk an economic overheating that in turn could result in a rapid series of rate increases and the risk of recession. On inflation, Yellen said it is near but still below the Federal Reserve's 2 percent goal, which she stressed is an objective and not a ceiling.
Moderate is once again both her current assessment and her outlook for the economic pace, firmness underpinned by the consumer. And in upbeat comments, she said business spending is showing greater strength and that the global economy is operating in a more robust and healthy way. In other comments, she said regulation has not stifled lending and that 2 percent GDP growth has generated plenty of jobs. She did not comment on the Fed's early talks to unwind their $4.5 trillion balance sheet.