Janet Yellen spoke to lawmakers today. After making it very, very clear that bad weather is the cause of the lackluster economy, Yellen then went on to confirm that the Fed will wind down quantitative easing (specifically, the bond-buying stimulus program) seven months from now if ”the labor market continues to improve and inflation remains low.”
Yellen is clear that if the Fed concludes that things are just right somewhere down the line, the Fed may or may not reduce bond-buying to zero. Even then, however, the Fed’s commitment to low interest rates remains in force indefinitely, we’re told.
In other words, there’s no new information at all here, and nothing has changed. The Fed is maintaining it’s usual position which is: “things are getting better, but just to make sure they get better even faster, we’ll continue with easy money until some point in the future, but we can’t know when that is, or what we’ll do.”
At some point, QE became a permanent, accepted part of the American economy. Once seen as a radical expansion of the Fed’s power, it’s now just what reasonable people support, and no member of Congress would ever dare suggest that it should be ended, not even at some definite point in the future.
Yellen also managed to get a comment about “rising inequality” in there, even though the Fed causes a lot of it, but one can argue that the only new comment of any substance is Yellen’s comment that “flattening out in housing activity could prove more protracted than currently expected.”
Here’s a helpful live blog of the event.