The Federal Reserve is “pleased” with the economy, Chairwoman Janet Yellen said Wednesday, but is holding off on raising interest rates because officials see an opportunity to accelerate growth and bring people into the workforce without risking inflation.
“We are generally pleased with how the U.S. economy is doing,” Yellen said during a press conference following the Fed’s decision Wednesday not to raise rates from the very low range of 0.25 percent to 0.5 percent.
In the past, such low rates at a time when the economy is perceived to be doing well would be unthinkable. But Yellen said Wednesday that the Fed was willing to leave them there, for now, to give the economy “room to run,” as inflation is also still low. The Fed is seizing the opportunity, with inflation low, to try to stoke greater job growth with easy money.
In particular, she mentioned that low rates could help bring people who have given up on finding work back into the labor force and into jobs.
“This is a very welcome development, both for the individuals involved and for the nation as a whole,” she said.
The Fed won’t let inflation overshoot the 2 percent target significantly, she added.
“Since monetary policy is only modestly accommodative, there appears little risk of falling behind the curve in the near future,” she said.
Inflation is running below 1 percent in the gauge favored by the Fed. “We’re not seeing strong pressures on utilization suggesting overheating,” Yellen said, adding later that “the economy has a little more room to run than might have been previously thought.”
