Janet Yellen has warned that even a recovering economy may not pull inflation back up towards the US Federal Reserve’s 2 per cent target in remarks that raise the possibility of easy monetary policy for longer than currently expected.
In a speech to the Economic Club of New York yesterday, Ms Yellen said that high levels of unemployment had put less downward pressure on inflation than expected, so higher employment might not pull prices up again.
The dovish comments by the Fed chairwoman increase the chances that the central bank will keep interest rates near zero for longer into 2015 as it tries to ensure inflation returns to its goal.