Taking extraordinary move to raise rates

Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic conditions, the committee decided to raise the target range for the federal funds rate to ¼ to ½ percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvements in labor market conditions and a return to 2 percent inflation.

Raise rates or hold

Janet Yellen, chair of the US Federal Reserve, and other members of the FOMC (Federal Open Market Committee) decided against raising U.S. interest rates last month in September 2015. The FOMC will meet again this week to reconsider. What should we expect? Should Janet Yellen try and raise rates or hold steady ?

Fed has NOT made income inquality worse says Yellen

It is true that interest rates effect asset prices but they have complex effect through balance sheets through liabilities and assets. To me the main thing that an accommodative monetary policy does is put people back to work. Since income inequality is surely exacerbated by having a high unemployment and a weak job market that has the most profound negative effects on the most vulnerable individual, to me putting people back to work and seeing a strengthening of the labor market that has a disproportionately favorable effect on vulnerable portions of our population, that's not something that increases income inequality.

There have been a number of studies that have been done recently that have tried to take account of many different ways in which monetary policy, acting through different parts of the transmission mechanism affect inequality and there's a lot of guesswork involved and different analyses can come up with different things. But a pretty recent paper that's quite comprehensive concludes that the -- that Fed policy has not exacerbated income inequality.

We try our best to make the best economic decision with available data

I think the main drivers of the turbulence have been concerns about the global outlook. That's how I read it. But I know that of course there is uncertainty about Fed policy. As I mentioned, we're well aware that there's been a huge focus on the decision today. And you know I would ask you to appreciate that there are a lot of cross currents in economic and financial developments that we need to take into account in deciding on what the appropriate course of policy is. And we don't make continuous decisions every single day about our policy. We meet periodically. 

We do our darnest to pull together the best analysis we can. And to exchange views. And to arrive at committee decisions. I do understand that during this inter-meeting period, that every word that an FOMC member has said has been parsed for its potential implications for what our decision will be. I think that's an unfortunate state of affairs.

But I understand I think it's natural when you're at a point when the conditions may be falling in place for there to be a shift in policy. It's natural that that should happen. And it does to some extent contribute to uncertainty in financial markets.