WASHINGTON (AP) – Federal Reserve Chair Janet Yellen on Thursday said she believed the risks concerning inflation are “two-sided,” stressing that price gains could both accelerate or slow down.
Testifying for the second day before Congress, Yellen sought to expand on remarks she had made Wednesday before the House Financial Services Committee in an apparent effort to adjust views in financial markets.
In her House comments, Yellen discussed the possibility that a recent slowdown in inflation could persist longer than the Fed expects. The comments helped trigger a big market rally, with the Dow Jones industrial average hitting a record high. Investors saw the remarks as a signal that the Fed, which has raised interest rates three times since December, might slow the pace of future interest rate increases.
But on Thursday, Yellen said that she believed it would be “premature” to conclude that a recent slowdown in price gains meant that the Fed would not be able to achieve its goal of 2 percent annual inflation.
After keeping its key policy rate at a record low near zero for seven years, the central bank began raising rates gradually with one quarter-point hike in December 2015, another one last December and two more in March and June of this year. It is now in a range of 1 percent to 1.25 percent. Many economists believe the Fed will raise rates one more time this year, in either September or December.