Janet L Yellen: Views on the economy and implications for monetary policy Speech by Ms Janet L Yellen, President and CEO of the Federal Reserve Bank of San Francisco, at the Portland Community Leaders’ Luncheon, Portland, Oregon, 29 July 2005. *  *  *  Thank you for that very kind introduction. It’s a pleasure to be here with you in this beautiful “City of Roses.” As a monetary policymaker, my main concern is the national economy, and that will be the chief focus of my remarks today. But as President of the San Francisco Fed, I also pay close attention to developments here in the Twelfth District, which, in many respects, mirror those of the nation. Looking at the big picture elements—growth, employment, and inflation—I’d say things are in reasonably good shape. Over the past two years, the nation’s output growth has been pretty steady, averaging just over four percent; this is solidly above trend, which, by most estimates, is around three and a quarter to three and a half percent. This growth has been amply in evidence here in the Pacific Northwest. While unemployment rates in Oregon and Washington remain above the nation’s rate, your region has largely recovered from the severe hit you took during the 2001 recession and its aftermath. As a result of sustained growth at the national level, slack in labor and product markets has trended down.
All in all, the prospects for inflation from the demand side look a bit better than they did when the repo rate was last raised. Another positive sign is that the wage agreements that have been concluded so far in 1998 indicate a rate of wage increases that is somewhat lower than in the main scenario described in December. However the recent weakening of the krona is a cause for concern. If it turns out to be permanent, it could affect inflation prospects. In the Riksbank we are now finalising the next Inflation Report, in which we will present an inflation forecast reaching into the first quarter of the year 2000. There, factors such as the Asian crisis, the wage negotiations and the exchange rate developments will be weighed and put into a larger context. The view of the inflation prospects that will result from this process will form the basis for future monetary policy.