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."
So she wants to run the economy 'hot'. I assume that means less interest rate hikes and possibly more debt-buying.
Submitted October 14, 2016 at 02:09PM by Slightly_Communist http://ift.tt/2e4mwET
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