WASHINGTON Dec 14 The following are highlights
of Federal Reserve Chair Janet Yellen's press conference on
Wednesday following the end of a two-day meeting of the U.S.
central bank's policy-setting committee.
YELLEN ON WHEN FED WILL TRIM BALANCE SHEET
"We want to feel that if the economy were to suffer an
adverse shock that we have some scope through traditional means
of interest rate cuts to be able to respond to that.
"There's no mechanical rule about what level of the federal
funds rate we might deem appropriate to begin that process. It's
not something that only depend on the level of the federal funds
rate. It also depends on our judgment of the amount of momentum
in the economy and possible concerns about downside risks to the
"So we have not yet made this decision but it is something
that we had long planned to begin to allow our balance sheet to
run off and that it would take several years and we would end up
if all goes well with a substantially smaller balance sheet than
we have at present."
YELLEN ON DODD-FRANK
"I would say it's very important not to roll back. There may
be some changes that could be made and we've suggested a few,
like eliminating the burden of compliance with the Volcker rule
or incentive compensation regulations for smaller banks or
modestly raising the threshold for banks that are subject to
enhanced credential supervision. But I would urge that it's
important to keep this in place."
YELLEN ON FOMC DISCUSSION OF TRUMP FISCAL PLAN, MARKET
REACTION TO ELECTION
"We did discuss these topics in our meeting today. I would
simply summarize by saying that all the FOMC participants
recognize that there is considerable uncertainty about how
economic policies may change, and what effect they may have on
YELLEN ON PLANNING TO SERVE OUT FOUR-YEAR TERM AS FED CHAIR
"I do intend to serve out my four-year term. I haven't made
any decision about the future. I recognize I might or might not
be reappointed. It's a decision I don't have to make and don't
have thoughts on at this time. As you said I recognize too that
I could stay on as a board member, and that's a decision for
YELLEN ON NEVER HAVING SAID SHE FAVORED A HIGH-PRESSURE
"I never said that I favor running a high-pressure economy.
As you can see in the SEP projections of the participants, and
this has long been true not just in this forecast but in earlier
ones as well, you see a modest undershoot, the unemployment rate
is projected to modestly undershoot for several years levels
that are deemed to be normal in the longer run. That's an
appropriate policy purely on the grounds that inflation is
running below our objective and while we don't want to overshoot
our 2 percent objective we also don't want a persistent
undershoot of our objective.... But I do want to make clear that
I have not recommended running a hot economy as some sort of
YELLEN ON FED INDEPENDENCE
"Well I'm not going to offer the incoming President advice
about how to conduct himself in policy. I'm a strong believer in
the independence of the Fed. We have been given the independence
by Congress to make decisions about monetary policy in pursuit
of our dual mandate objectives of maximum employment and
inflation, and that is what I intend to stay focused on. That is
what the committee is focused on."
YELLEN ON FED NOT BEHIND THE CURVE
"We are not seeing evidence in labor markets of very
substantial upward pressures on labor that could signify extreme
shortages of labor that could propel inflation higher in a very
rapid way, and inflation is still operating below our objective.
So I do not judge that we are behind the curve. My judgment is
that we are in a good path to reaching our objectives. But of
course, the outlook is uncertain."
YELLEN ON FISCAL POLICY NOT NEEDED TO STIMULATE LABOR MARKET
"There may be some additional slack in labor markets, but I
would judge that the degree of slack has diminished. So I would
say at this point that fiscal policy is not obviously needed to
provide stimulus to help us get back to full employment.
"But nevertheless let me be careful that I am not trying to
provide advice to the new administration or to Congress as to
what is the appropriate stance for policy. There are many
considerations that Congress needs to take account of and many
bases for justifying changing fiscal policy."
YELLEN ON CURRENT "MODERATE" LEVEL OF ACCOMMODATION
"The degree of accommodation I would characterize as
moderate... We currently judge the neutral level of the federal
funds rate to be pretty low. So there is some accommodation.
Remember that inflation is still below our objective."
YELLEN ON RATE HIKE AS A VOTE OF CONFIDENCE IN ECONOMY
"Our decision to raise rates should certainly be understood
as a reflection of the confidence we have in the progress the
economy has made and our judgment that that progress will
continue... It is a vote of confidence in the economy."
YELLEN ON 'MODEST' ADJUSTMENT TO PROJECTED RATE HIKE PATH
This is a very modest adjustment in the path of the fed
funds rate, and involves changes by only some of the
participants. Some of the participants, but not all of the
participants, did incorporate some change in fiscal policy into
their projections, and that may have been a factor.
YELLEN ON FISCAL POLICY
"Changes in fiscal policy or other economic policies could
potentially affect the economic outlook. Of course it is far too
early to know how these policies will unfold. Moreover, changes
in fiscal policy are only one of the many factors that can
influence the outlook in the appropriate course of monetary
(Reporting by Lucia Mutikani, Ann Saphir and Jonathan Spicer;
Editing by Andrea Ricci)