Yellen Job One Is Redoing Guidance Without Roiling Markets
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In her first meeting as Federal Reserve chair next week, Janet Yellen will put her stamp on policy by reaching for a favorite tool of central bankers: words intended to guide markets in the direction policy makers want.
For more than a year, the Fed has kept monetary policy easy with assurances that its main interest rate won’t rise at least as long as unemployment exceeds 6.5 percent and the outlook for inflation is no more than 2.5 percent. That guidance is almost obsolete: while unemployment is forecast to fall below the threshold this year, most Fed officials don’t foresee a rate increase until 2015.