WASHINGTON - Federal Reserve Chair Janet Yellen says the Great Recession complicated the Fed's ability to assess the U.S. job market and made it harder to determine when to adjust interest rates.
Yellen's remarks to an annual Fed conference in Jackson Hole, Wyoming, offer no signal that she's altered her view that the economy still needs Fed support from ultra-low interest rates. The timing of a Fed rate increase remains unclear.
She notes that while the unemployment rate has steadily declined, other gauges of the job market are harder to assess and may reflect continued weakness. These include high levels of people who have been unemployed for more than six months, many people working part time who would like full-time jobs and weak pay growth.
Minutes of the Fed's July 29-30 meeting released Wednesday showed that officials engaged in a sharp debate over whether to raise rates sooner than expected if the economy keeps strengthening. In the end, the Fed made no changes at the July meeting. It approved, 9-1, maintaining its current stance on rates. But the minutes pointed to a distinct division among officials over the timing of an increase.
That debate has continued at Jackson Hole, with Fed officials expressing clashing views during a series of TV interviews before the conference began with a reception and dinner Thursday night.
Charles Plosser, president of the Fed's Philadelphia regional bank, said he was uncomfortable with the Fed's current policy statement that it expects to keep its key short-term rate unchanged for a "considerable time" after its bond purchases end. Plosser cast the lone dissenting vote at the July meeting.
In an interview Wednesday with CNBC, Plosser said he felt the Fed was "running a very risky policy" given the steady signs of strength in the economy.
"I would prefer to begin raising rates sooner and raise them more gradually," he said.
Esther George, president of the Kansas City Fed, which sponsors the Jackson Hole conference, said in an interview on the Fox Business Network that she also thought the Fed needed to "begin sooner rather than later" raising rates to give the economy time to adjust after a prolonged period of low rates. George, like Plosser, is viewed as a "hawk" -- someone who thinks the Fed should be more concerned about avoiding high inflation than about continuing to try to boost the economy.
John Williams, president of the San Francisco Fed, said in a separate interview on CNBC that he thought, based on his own forecasts of the economy's performance, that a "reasonable guess" for the first rate hike would be next summer. But he said that the timing would ultimately depend on economic data and that if the economy accelerates, the Fed could act sooner.
Williams has been a supporter of the majority of officials who back Yellen's view that the job market still isn't healthy enough for the Fed to start boosting rates.
Yellen and others who think the Fed should withdraw its support only slowly cite persistent drags on the job market, such as high levels of people who have been unemployed for more than six months, many people working part time who would like full-time jobs and weak pay growth.
Many economists still think the Fed will wait until mid-2015 to start raising rates. In its July policy statement, the Fed acknowledged that growth was strengthening. But it indicated that it needed to see further improvement in the job market before it starts raising its key short-term rate.
At the July meeting, the Fed reduced its bond purchases aimed at keeping long-term rates low by another $10 billion to $25 billion. It was the sixth $10 billion reduction in the purchases. Before the reductions began in December, the Fed was buying $85 billion in bonds each month to try to keep long-term rates low.