Inflation has been softening and Janet Yellen is expressing concern over inflationary expectations which she noted have been slipping and warned would be a worry if they slipped further. She said productivity growth has been very slow, at 1 percent vs 2.5 percent previously, and that real income has been stagnant for a long time. Yellen also noted, in defense of the Federal Reserve's communication efforts, that the ongoing series of rate hikes was well anticipated and that there hasn't been any significant market reaction to the Fed's plan to unwind its balance sheet.
Yellen, like others at the Federal Reserve, believes asset valuations are rich by normal standards though she noted that the Fed doesn't target asset prices in its policy deliberations. She would not comment on her relationship with President Trump though she confirmed that she meets regularly with Treasury Secretary Mnuchin. Much of her comments were on the banking system where she still worries about systemic risks though she said the capital positions of big banks are now stronger than before.