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Fed Must Take Aggressive Steps To Safeguard US Economy, Yellen Says

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The Eccles Building, which houses the U.S. Federal Reserve in Washington, D.C.

Janet Yellen said at a conference of policymakers in Boston that the Fed may need to trigger a “high-pressure economy” to undue damages from the 2008 crisis before they become permanent features of the US economy.

While she did not directly address interest rates or particular policies, Yellen communicated a deepening concern that the US economy may need aggressive steps taken to safeguard it, Reuters reports. That could mean temporarily pushing robust aggregate demand while tightening the already tight labor market.

While Yellen’s comments were posed as questions that need more research, one idea she mentioned was pursuing policies that continue to lower unemployment while boosting consumption, even at the risk of triggering high inflation. [Reuters]