Imprudent to wait until inflation hits 2% target, Fed's Yellen says

The head of the US central bank argued against waiting until inflation had returned to its 2.0% target before tightening policy.

So too, the monetary authority should be careful not to proceed too slowly.

Speaking at the National Association for Business Economics, Federal Reserve chair Janet Yellen said: "It would be imprudent to keep monetary policy on hold until inflation is back to 2%.

"[The Fed] should also be wary of moving too gradually."

Nevertheless, she admitted there was uncertainty on various fronts, including the strength of the jobs market, what was implied by the current level of inflation expectations and even the fundamental forces behind inflation,

Regarding the possibility that there might still be some slack in the labour market, she said: "If so, the economy could sustain a higher level of employment and output in the longer run than now anticipated -- a very beneficial outcome, albeit one that would require recalibrating monetary policy over time in order to reap those benefits and compensate for the accompanying reduction in inflationary pressures."

There was also uncertainty regarding the role that factors ranging from foreign competition to emergence of global supply chains might be having.

Given those uncertainties, "my colleagues and I must be ready to adjust our assessments of economic conditions and the outlook when new data warrant it."