Federal Reserve Chairwoman Janet Yellen issued a vote of confidence in the U.S. economy Wednesday, saying she sees the fundamentals of the economy as strong and doesn’t foresee a recession on the horizon.
“I feel confident about the fundamentals,” Yellen said at a press conference following the Fed’s announcement Wednesday that it would raise interest rates a quarter point from zero. She later added that she doesn’t “see anything in the underlying strength of the economy that would lead me to be concerned” about a looming recession.
At 78 months, the economic expansion is much longer than the postwar average of 58 months. That fact alone, however, doesn’t worry Yellen. “I think it’s a myth that expansions die of old age,” she said.
Yellen said the decision by the Fed to raise interest rates Wednesday was a reflection of the improvement in the economy, stating that the recovery to near-full health is real even if uneven across regions and industries.
Her comments could be read as a rebuttal to some members of Congress who have warned that the Fed’s action will choke off the recovery before it is fully realized. “When millions of Americans are working longer hours for lower wages, the Federal Reserve’s decision to raise interest rates is bad news for working families,” siad Sen. Bernie Sanders of Vermont, a Democratic candidate for president, in response to the Fed’s interest rate increase Wednesday.
Sanders cited the high level of people who have been forced into part-time work or who have given up the job hunt entirely. Yellen acknowledged that phenomenon Wednesday, but suggested that the labor market is getting close to fully repaired and argued that the Fed must act ahead of real developments in the economy because its interest rate policies act on a lag.
Yellen discounted the possibility, raised by some critics, that the Fed is moving prematurely and will be forced to lower rates again to keep the economy moving toward full health, with low unemployment and inflation rising toward its target.
“I don’t believe we’ll have to do it,” Yellen said of lowering rates again.
The chairwoman said the Fed won’t follow any preset course for subsequent rate hikes, insisting that they will be dependent on economic developments.
She declined to say, however, what factors were necessary for the Fed to keep raising rates. In particular, she did not stipulate that inflation would have to rise to be convinced that the Fed’s 2 percent target for inflation will be met.
“I’m not going to give you a simple formula,” she told reporters.
