by William Skink
Today Janet Yellen was asked if the Fed had lost credibility. Her response is an amazing garble of words that needs to be broken up into lines of poetry to truly be appreciated. Enjoy!
Well, let me start — let me
start with the question of
the Fed’s credibility.
And you used the word “promises”
in connection with that.
And as I tried to emphasize
in my opening statement, the paths
that the participants project
for the federal funds rate
and how it will evolve are not
a pre-set plan or commitment or
promise of the committee.
Indeed, they are not even — the median
should not be interpreted as
a committee-endorsed forecast.
And there’s a lot of uncertainty
around each participant’s projection.
And they will evolve.
Those assessments of appropriate policy
are completely contingent
on each participant’s forecasts of the economy
and how economic events will unfold.
And they are, of course, uncertain.
And you should fully expect
that forecasts for the appropriate path of policy
on the part of all participants
will evolve over time
as shocks, positive or negative,
hit the economy that alter those forecasts.
So, you have seen a shift
this time in most participants’ assessments
of the appropriate path for policy.
And as I tried to indicate, I think
that largely reflects a somewhat
slower projected path for global growth — for growth
in the global economy
outside the United States, and for some
tightening in credit conditions
in the form of an increase in spreads.
And those changes in financial conditions
and in the path of the global economy
have induced changes in the assessment
of individual participants
in what path is appropriate
to achieve our objectives.
So that’s what you see — that’s what
you see now.