Fed's Yellen says high-pressure policy may be only way back from crisis | Reuters
By Howard Schneider and Svea Herbst-Bayliss | BOSTON BOSTON The Federal Reserve may need to run a 'high-pressure' economy in order to reverse damage from the crisis that depressed output, sidelined workers and risks becoming a permanent scar, Fed Chair Janet Yellen said in a broad review of where the recovery may still fall short.Though not addressing interest rates or immediate policy concerns directly, Yellen's lunch address on Friday to a conference of policymakers and top academics laid out the deepening concern at the Fed that U.S. economic potential is slipping - and may need aggressive steps to rebuild it. The question, Yellen said, is whether that damage can be undone 'by temporarily running a 'high-pressure economy,' with robust aggregate demand and a tight labor market
By Howard Schneider and Svea Herbst-Bayliss
BOSTON The Federal Reserve may need to run a "high-pressure" economy in order to reverse damage from the crisis that depressed output, sidelined workers and risks becoming a permanent scar, Fed Chair Janet Yellen said in a broad review of where the recovery may still fall short.Though not addressing interest rates or immediate policy concerns directly, Yellen's lunch address on Friday to a conference of policymakers and top academics laid out the deepening concern at the Fed that U.S. economic potential is slipping - and may need aggressive steps to rebuild it. The question, Yellen said, is whether that damage can be undone "by temporarily running a 'high-pressure economy,' with robust aggregate demand and a tight labor market. One can certainly identify plausible ways in which this might occur." "Increased business sales would almost certainly raise the productive capacity of the economy by encouraging additional capital spending, especially if accompanied by reduced uncertainty about future prospects," Yellen said. "In addition, a tight labor market might draw in potential workers who would otherwise sit on the sidelines and encourage job-to-job transitions that could also lead to more efficient - and, hence, more productive - job matches. Finally, albeit more speculatively, strong demand could potentially yield significant productivity."U.S. stocks posted further gains after Yellen's remarks, while the dollar dropped and Treasuries rose, pushing yields on the 2-year note to session lows.
Her remarks, while pointing largely to research she feels needs to be done, nevertheless add an important voice to a debate that is intensifying within the Fed over whether the economy is close enough to normal to need steady rate increases, or whether it remains subpar and scarred. That could figure importantly in coming debates over rate policy, and over whether support is building at the Fed to risk letting inflation move above its 2 percent target in order to employ more workers and perhaps encourage more investment.From weak inflation to the effect of low interest rates on spending, little in the economy has been acting as the Fed expected.
Yellen said it may be the case that the crisis has done such permanent damage that fiscal and monetary officials will have to retool how they approach their jobs. For central bankers, that would mean keeping a broader set of less conventional tools at the ready, and using them more quickly in a new downturn. The aim, she said, would be to avoid further scarring. "This post-crisis experience suggests that changes in aggregate demand may have an appreciable, persistent effect on aggregate supply - that is, on potential output," Yellen said. "If strong economic conditions can partially reverse supply-side damage after it has occurred, then policymakers may want to aim at being more accommodative during recoveries than would be called for under the traditional view that supply is largely independent of demand," Yellen said. It would "make it even more important for policymakers to act quickly and aggressively in response to a recession, because doing so would help to reduce the depth and persistence of the downturn."
With public expectations about inflation so hard to budge, Yellen said that tools like forward guidance, "may be needed again in the future, given the likelihood that the global economy may continue to experience historically low interest rates, thereby making it unlikely that reductions in short-term interest rates alone would be an adequate response to a future recession." (Reporting by Howard Schneider and Svea Herbst-Bayliss; Editing by Andrea Ricci)
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NEW YORK Major U.S. stock indexes climbed again on Thursday and set fresh record highs as a month-long rally following the presidential election of Donald Trump rolled on.The Dow Jones industrial average .DJI rose 64.37 points, or 0.33 percent, to 19,613.99, the S&P 500 .SPX gained 4.76 points, or 0.21 percent, to 2,246.11 and the Nasdaq Composite .IXIC added 23.59 points, or 0.44 percent, to 5,417.36
OKLAHOMA CITY At least one person was shot at Oklahoma City's main airport on Tuesday, prompting flights to be halted and a shelter in place order put in effect, with police saying there may also be another shooting victim in the incident.The shots were fired in a parking lot at Will Rogers World Airport and no information was available about the condition of the known victim or what prompted the shooting, Oklahoma City Police Captain Paco Balderrama told reporters."We have located one victim and we are looking for a second reported victim," he said.What appeared to be about a dozen police officers armed with rifles were seen patrolling on the roof of an airport parking garage on a live video feed from TV broadcaster KOCO. Tactical teams were searching the garage for a suspect and a possible second victim, TV station News 9 cited a police official as saying.One person was transported to an area hospital on emergency status, Oklahoma's Emergency Medical Services Authority said, without providing details on the person. "If you are inside of the airport, shelter in place until advised otherwise," Oklahoma City Police said on their Twitter feed.The airport said on Twitter that all arrivals and departures had been suspended until further notice.
By Megan Rowling MARRAKESH, Morocco (Thomson Reuters Foundation) - Natural disasters have a more devastating impact on the poor than widely thought, forcing some 26 million people into poverty each year and setting back global spending on goods and services by the equivalent of $520 billion annually, the World Bank said on Monday.The human and economic costs of disasters, caused by extreme weather and earthquakes, have been underestimated by up to 60 percent because they ignore the high toll on the consumption and related well-being of the poor, the bank said in a new study.“Severe climate shocks threaten to roll back decades of progress against poverty,” said World Bank Group President Jim Yong Kim in a statement.