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Fed guidance to become more vague under Yellen: Alice Rivlin

Nicole Goodkind
Nicole Goodkind
Daily Ticker

Fed Chair Janet Yellen will make her mark on monetary policy today as she oversees her first Federal Open Market Committee meeting and press conference.

Yellen is expected to continue former Chairman Ben Bernanke’s tapering schedule (lowering the amount of bonds the central bank purchases each month from $65 billion to $55 billion) but she will likely depart from his forward guidance. 

Related: What markets want to hear from Fed Chair Yellen this week

Yellen is widely expected to ditch the Fed’s 6.5% unemployment threshold for considering an increase in interest rates.

Unemployment in February was 6.7%, strikingly close to the current threshold. Still, some argue that large numbers of people leaving the workforce have caused the drop in unemployment—not a stable, strong economy.

Alice Rivlin, former Vice Chair of the Fed, joined The Daily Ticker at The Atlantic Economy Summit to discuss the potential change in forward guidance.

“I think they might be much vaguer," she says. "They won’t pick another number, but they might say ‘there are a lot of ways to look at the labor market’. The unemployment rate has come down quite nicely, but it’s not necessarily a gauge of how strong the labor market is...It’s not a strong labor market, not as strong as you’d think if you heard just one number.”

Related: Fed tapering will lead to LOWER, not higher, rates: Dan Alpert

Aside from the employment threshold, Rivlin doesn’t expect anything shocking to come out of the FOMC meeting. “I don’t expect any dramatic changes at this meeting but Janet [Yellen] is a very good leader and a very sensible person,” she says.

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