Market turbulence? Check? Heightened concerns about economic growth—globally and for the US? Check. Does this mean that the Fed won’t raise interest rates this year? Not necessarily. Or so Fed Chair Janet Yellen intimated in a speech today. A slowdown in China’s growth rate and a mixed bag of numbers for the US lead some (many?) economists to conclude that it’s not a good time to start squeezing monetary policy. But Yellen has a different view. Sure, she may have surprised the crowd with the no-hike decision at last week’s FOMC meeting–a decision that was widely interpreted as the Fed’s way of saying that the future looked a bit dicey. But don’t confuse last week’s Yellen with today’s Janet.

“We do not currently anticipate that the effects of these recent developments on the US economy will prove to be large enough to have a significant effect on the path for policy,” she said. Yellen went on to outline the argument for pressing ahead with a rate hike in the near future even as the macro trend appears to be weakening:

Given the highly uncertain nature of the outlook, one might ask: Why not hold off raising the federal funds rate until the economy has reached full employment and inflation is actually back at 2 percent? The difficulty with this strategy is that monetary policy affects real activity and inflation with a substantial lag. If the FOMC were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession. In addition, continuing to hold short-term interest rates near zero well after real activity has returned to normal and headwinds have faded could encourage excessive leverage and other forms of inappropriate risk-taking that might undermine financial stability. For these reasons, the more prudent strategy is to begin tightening in a timely fashion and at a gradual pace, adjusting policy as needed in light of incoming data.

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