Yellen's claim Fed isn't behind curve challenged by robust hiring data
As the Fed prepares to meet next week, a small but growing number of economists are wondering whether the central bank has been tardy in tightening its stance.
By Bloomberg | Updated:
Twice in the past three months, Federal Reserve chair Janet Yellen has made a point of insisting that t h e Federal Open Market Committee has not been too slow in raising interest rates.
“Recently , Fed speakers have been rhetorically asking whether the FOMC is behind the curve,“ Michael Feroli, chief US economist at JPMorgan Chase & Co. in New York, said in a recent note to clients. “While they consistently answer in the negative, the very fact they are asking the question may belie the doubts in their own heads.“
As the Fed prepares to meet next week to consider an interest-rate increase that investors view as a certainty, a small but growing number of economists are wondering whether the central bank has been tardy in tightening its stance.While some of them have been cautioning about lax monetary policy for a while, the warnings have taken on fresh relevance following an employment report that was strong across the board.
Payrolls grew 235,000 in February , well above the 75,000-125,000 monthly pace that Yellen has said is sustainable in the long-run. Joblessness dipped to 4.7%, in line with most officials' estimate of what constitutes full employment. And wage growth accelerated, with average hourly earnings reg istering a year-on-year gain of 2.8%.
Policy makers pencilled in three quarter percentage-point rate increases for 2017, according to the median projection in forecasts released in December. Investors are on alert for a bump up in that forecast when officials release new forecasts on March 15.
INFLATION GOAL
“We're very close to achieving our dual mandate goals,“ San Francisco Fed President John Williams said on February 28 in Santa Cruz, California.
“Recently , Fed speakers have been rhetorically asking whether the FOMC is behind the curve,“ Michael Feroli, chief US economist at JPMorgan Chase & Co. in New York, said in a recent note to clients. “While they consistently answer in the negative, the very fact they are asking the question may belie the doubts in their own heads.“
As the Fed prepares to meet next week to consider an interest-rate increase that investors view as a certainty, a small but growing number of economists are wondering whether the central bank has been tardy in tightening its stance.While some of them have been cautioning about lax monetary policy for a while, the warnings have taken on fresh relevance following an employment report that was strong across the board.
Payrolls grew 235,000 in February , well above the 75,000-125,000 monthly pace that Yellen has said is sustainable in the long-run. Joblessness dipped to 4.7%, in line with most officials' estimate of what constitutes full employment. And wage growth accelerated, with average hourly earnings reg istering a year-on-year gain of 2.8%.
Policy makers pencilled in three quarter percentage-point rate increases for 2017, according to the median projection in forecasts released in December. Investors are on alert for a bump up in that forecast when officials release new forecasts on March 15.
INFLATION GOAL
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The argument that the Fed has been too slow off the mark starts with the low level of the benchmark federal funds rate that the central bank targets. At 0.50.75%, the target range is markedly below the 1.7% core inflation rate. And it's at that depressed level just as the Fed is closing in on its objectives of maximum employment and 2% inflation -a fact that officials themselves acknowledge.“We're very close to achieving our dual mandate goals,“ San Francisco Fed President John Williams said on February 28 in Santa Cruz, California.
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