At a press conference following the FOMC monetary policy meeting, Federal Reserve Chair Janet Yellen stated that "the U.S. economy will continue to grow moderately, and global economic and financial developments pose certain risks to the U.S. economy." Investors immigrating to the United States have a positive assessment of the U.S. economic outlook and expect further improvements in the labor market.
Regarding Interest Rates:
Yellen stated that the decline in long-term interest rates will mitigate the impact of tightening financial conditions, noting that maintaining the current interest rate range partly reflects the influence of U.S. and global economic conditions. She also emphasized that the Federal Reserve will adjust its monetary policy stance as necessary, and given that interest rates remain near zero, caution is appropriate. The federal funds rate may remain below its long-term level for a long time, and there is considerable uncertainty regarding the long-term neutral rate. She also pointed out that most FOMC members have lowered their interest rate expectations compared to last December. Federal funds rate projections are not future policy plans; every meeting is a live meeting, and the future trajectory of interest rates is uncertain.
Labor Market:
Yellen stated that the labor market is expected to improve further. An average of 230,000 jobs have been added per month over the last three months, the unemployment rate is consistent with the full employment forecast, and other unemployment indicators continue to improve. Since last autumn, the labor force participation rate has improved significantly, with more people actively seeking work, and the labor force participation rate has risen notably. Yellen also noted that wage growth has not yet shown signs of sustained acceleration.
Inflation:
Yellen stated that it remains to be seen whether core inflation can maintain steady growth. The weak investment environment reflects the situation in oil extraction, and the rise in the Personal Consumption Expenditures (PCE) index indicates that the effect of falling energy prices is fading. Inflation is expected to rise to 2% over the next 2-3 years. We cannot take the stabilization of inflation expectations for granted, and the Federal Reserve statement emphasizes that the Fed will monitor inflation progress.
Economic andGDPForecasts:
Yellen stated that the current forecast for GDP growth has been revised downward from last December. She also noted that the global economic outlook and financial conditions have tightened further, though financial conditions have improved significantly recently. The economy has expanded moderately since the fourth quarter of last year, the housing market has recovered moderately, and economic growth appears to have increased since the fourth quarter.
Regarding Interest Rates and Rate Hikes:
Yellen stated that the economy will certainly follow an unexpected path. Federal Reserve interest rate expectations are not a guarantee of action, and the downward revision in rate hike forecasts also reflects tightening credit conditions. Most participants expect future rate hikes, and the Federal Reserve is not trying to engineer an inflation overshoot. U.S. economic growth is still expected to be higher than potential growth, and many forecasters have lowered their global growth projections. The slowdown in China's economic growth was surprising, and Japan's move to negative interest rates was also surprising. Some emerging market economies are suffering from the drag of low oil prices, indicators show that Eurozone economic growth is slightly weak, and the decline in global expectations is sufficient to affect the Federal Reserve's outlook. Yellen emphasized that a rate hike is still possible at the April meeting.
Regarding International Crude Oil Prices:
Yellen stated that when studying inflation performance, one finds many factors; some households benefit from falling oil prices, potentially saving 1000 dollars per year. The Federal Reserve has seen a significant decline in oil exploration and production activities, but the FOMC has basically not considered oil price fluctuations. Oil prices near the 50 dollars / barrel level will not have a major impact on Federal Reserve policy. She also noted that if oil prices reach above 50 dollars / barrel, it could push up inflation expectations.
Impact of Global Financial Markets and Monetary Policy Divergence:
Yellen stated that the global economic situation does pose certain risks to the U.S. economy, but not necessarily downward impacts. China and Japan have both taken measures, and other stimulus policies may bring upside risks. Monetary policy in any country has spillover effects, and U.S. monetary policy may diverge from other countries globally. U.S. economic growth is stronger than in other countries, the U.S. economy has been very resilient in recent months, and U.S. households have benefited from falling oil prices. Although the U.S. labor market is not balanced, it is generally improving. She also noted that the interest rate path may to some extent reflect the full employment forecast.
