Yellen says equity declines and dollar strength could weigh on economic activity

Yellen says equity declines and dollar strength could weigh on economic activity

10 February 2016, 14:45
Sherif Hasan
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Highlights from Yellen's statement

  • Inflation continues to run below the (FOMC) Committee's 2 percent objective
  • The Committee did not adjust the target range in January
  • U.S. GDP is estimated to have increased about 1-3/4 percent in 2015
  • The low average pace of inflation can be traced to earlier steep declines in oil prices and in the prices of other imported goods
  • The Committee expects inflation to remain low in the near term
  • Low oil prices will boost economic growth more than we expect."
  • Financial conditions in the United States have recently become less supportive of growth, with declines broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar."
  •  FOMC participants' projections of the appropriate federal funds rate over the next three years generally shifted to lower values
  • The median projection now stands at 1.4 percent at the end of 2016, 2.4 percent at the end of 2017, and 3.3 percent at the end of 2018.
  • Economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate
  • The economy could grow more rapidly or that inflation could increase more rapidly
  • If the economy were to disappoint, a lower path of the federal funds rate would be appropriate
  • Unemployment rate fell to 4.8 percent in January, 0.8 percentage point below its level a year ago
  • These measures remain above the levels seen prior to the recession, suggesting that some slack in labor markets remains.
  • One area of particular strength has ben purchases of cars and light trucks; sales of these vehicles in 2015, reached their highest level ever
  • Homebuilding activity has continued to move up, on balance, although the level of new construction remains well below the longer-run levels implied by demographic trends.
  • Foreign economic developments, in particular, pose risks to U.S. economic growth
  • Low commodity prices could trigger financial stresses in commodity -exporting economies