Yellen: ‘The buck stops with me’

Federal Reserve Chairwoman Janet Yellen used her first press conference as the central bank head to underline her commitment to getting the economy on track.

Yellen sought to assure markets that the Fed plans to provide plenty of assistance to the economy despite the decision to gradually end bond purchases. She painted herself as much in the mold of her predecessor, Ben Bernanke, and said she’s committed to the job at hand.

“I feel the buck stops with me,” she said Wednesday, adding, “We are committed to exactly the same set of goals.”

However, her remark that the Fed could be eyeing a rate hike roughly six months after it ends the bond purchases — something that could come this fall — sent markets rapidly downward, as the timeline was more aggressive than many had expected.

The Fed said in its policy statement, as it had in the past, that a “considerable time” is likely needed between when the Fed stops buying bonds and when it begins raising rates. Asked about that term, Yellen said she viewed it to mean a timeframe of roughly six months.

{mosads}The Dow Jones Industrial Average, which turned slightly negative after the Fed statement was released, took a steep turn downward after that remark. The blue-chip index closed the day down 113 points, after posting modest gains before the Fed had its say.

Economic projections released by the Fed in conjunction with its latest statement show that the vast majority of policy-setting Fed officials see a rate hike coming sometime in 2015.

But Yellen urged the public and financial markets to not read the Fed’s projections too narrowly, emphasizing that these are forecasts and subject to change as conditions warrant.

“Monetary policy will be geared to evolving conditions in the economy,” she said, adding, “I do want to emphasize, this is a forecast.”

Yellen’s comments came after the Fed announced its plans to continue its slow exit from stimulus.

The central bank said it would cut by $10 billion the size of its monthly bond purchases that make up its latest round of quantitative easing, dropping the total to $55 billion. In its policy statement, the Fed also abandoned a threshold it had previously set for when the central bank might be ready to raise rates.

Previously, the Fed had said it would not likely raise rates before the unemployment rate fell below 6.5 percent. But with the jobless rate at 6.7 percent and the Fed not ready to hike borrowing costs, the bank opted to scrap that numerical threshold.

Instead, the Fed said it would take into account a wide range of economic factors, including the job market, signs of inflation, and any new developments in financial markets.

In her remarks, Yellen emphasized that the elimination of this threshold should not be seen as a change in the Fed’s thinking. Rather, it was dropped because the unemployment rate had dropped quicker than expected, inflation remains low, and the economy still appears to be in need of support.

With the Fed nearing a threshold for a rate hike and not seeing the conditions to merit one, the central bank opted to drop the specific number and instead focus on a broader range of less-specific criteria as it navigates its way through the stimulus exit.

On the broader economy, the Fed struck a fairly optimistic tone, saying that it expects there is enough underlying strength in the economy to further improve the labor market.

The Fed also gave a nod in its statement to winter weather as a temporary factor that slowed economic activity in the first months of the year.

Yellen said the cold snap definitely contributed to the slowdown, but perhaps not as much as the Fed had anticipated in the thick of the storm.

“We probably overdid the optimism in January,” she said.

In their new projections, Fed officials slightly pared back their expectations for economic growth, but boosted expectations for the labor market.

Now, Fed officials expect the economy to grow between 3 percent and 3.2 percent in 2015, down from a 3 percent-3.4 percent range in December. They expect the jobless rate to fall to between 5.6 percent and 5.9 percent, down further than December’s expectation of 5.8 percent-6.1 percent.

The Fed began slowing its stimulus in December, when it announced that it would begin gradually reducing the size of its monthly bond purchases, always keeping an eye on the economy while doing so. A spate of disappointing economic data to open 2014 was not enough to dissuade the Fed, as it stuck with the stimulus exit at its January meeting.

With Wednesday’s announcement, the Fed has lowered the size of its purchases by $30 billion, and if the economy continues to steadily improve and the Fed sticks with its plan, it could stop buying bonds altogether by this fall.