The Federal Reserve is not in a hurry to follow European and Chinese monetary authorities by raising interest rates to combat inflation.
Janet Yellen told members of The Economic Club of New York that rising food and oil prices should have only a temporary affect on consumer inflation in the United States. While the Fed is keeping a close eye on inflation, for now Yellen sees no reason to tighten monetary policy.
Some Fed regional presidents have recently expressed concerns that the Fed’s stimulative policy is fueling inflation. However, a majority of Fed officials seem to back the views of Yellen, which mirror the views of Chairman Ben Bernanke.
“In so long as longer-run inflation expectations remain stable, the increases seen thus far in commodity prices and headline consumer inflation are not likely, in my view, to become embedded in the wage and price setting process and therefore are not likely to warrant any substantial shift in the stance of monetary policy,” Yellen said in her speech.