* Yellen says economy is falling short in terms of
* Williams says Fed could raise rates by mid-2015 as jobless
* Fisher: Fed's easy policy could fuel future inflation
By Ann Saphir, Alexandra Alper and Jonathan Spicer
SEATTLE/ MEXICO CITY/ WASHINGTON, March 5 (Reuters) -
F ederal Reserve Chair Janet Yellen vowed on Wednesday to "do all
that I can" to boost a U.S. economy where unemployment is too
high and inflation is too low.
"The economy continues to operate considerably short" of the
central bank's objectives of full employment and stable prices,
Yellen said at a swearing-in ceremony at the central bank in
"The economy is stronger and the financial system is
sounder," added Yellen, who succeeded Ben Bernanke on Feb. 1.
"We have come a long way, but we have farther to go."
The brief comments were a broad reiteration of what she told
two congressional committees last month: that the United States
appears to be clawing its way back from the 2007-2009 recession
but that the Fed is in no rush to tighten policy.
Speaking clear across the country, San Francisco Fed chief
John Williams gave a more upbeat assessment of the economy, and
suggested that rate hikes could come as soon as next year.
"My own view, based on my own forecast, is that it would be
sometime around the middle of next year," Williams told
reporters after a speech to students at the University of
Seattle. "It could be later or earlier, depending on how the
Williams said he projects the economy to grow about 2.5
percent this year, slower than he had earlier projected because
of the effects of an unusually cold weather, but fast enough to
bring down the unemployment rate to 6.25 percent by year's end.
That is down from a 6.6 percent reading in February, said
Williams, who was Yellen's top researcher when she ran the San
Francisco Fed before moving to Washington as Fed vice chair in
Next year, he projected, 3 percent growth will likely bring
unemployment down to near-normal levels of 5.5 percent by the
end of 2015.
Still, he said, because of the lasting damage of the
financial crisis to the economy, the Fed may not raise rates all
that high, at least at first.
"My own view is that we still have significant, if you will,
headwinds to the economy over the next several years that are
still slowing growth in terms of demand, relative to trend, so
that we need a lower real interest rate, fed funds rate, than
you would in say, over history," he said.
The views of the policymakers that head the Fed's 12
regional reserve banks are sometimes at odds with those of the
Fed chair in Washington.
The differences underscore the challenges Yellen will face
in crafting the future of monetary policy as she heads to her
first Fed policy-setting meeting as chair, later this month.
Dallas Fed President Richard Fisher, one of the Fed's most
vociferous opponents of its massive bond-buying program, made
his differences with Yellen clear in a speech in Mexico City on
"There are increasing signs quantitative easing has
overstayed its welcome: Market distortions and acting on bad
incentives are becoming more pervasive," he said of the Fed's
asset purchases, which are sometimes called QE.
Yellen has supported the bond-buying from its beginning,
though she has also lent her weight to the decision late last
year to begin paring the program back, with a view to ending it
The program has resulted in a Fed balance sheet of more than
$4 trillion and ballooning reserves at banks, which Fisher and a
few others at the Fed worry could fuel future inflation.
"The real tools that we are focusing on are how we manage
the exit from the current hyper-accommodative monetary policy
and how do we make sure ... that we do it in a way that doesn't
allow the current very large and presently non-inflationary
monetary base ... from becoming inflationary," Fisher said
following his speech.
The world's biggest economy expanded at a decent 2.4 percent
rate in the fourth quarter and has slowed this year due in part
to severe weather.
The U.S. unemployment rate is down from a recessionary high
of 10 percent in 2009, but it remains high and jobs growth is
erratic. Inflation, meanwhile, is languishing near 1 percent,
about half the Fed's 2 percent target.
"Too many Americans still can't find a job or are forced to
work part time," Yellen said on Wednesday, underscoring her
long-standing focus on the troubled labor market.
"I promise to never forget the individual lives, experiences
and challenges that lie behind the statistics we use to gauge
the health of the economy," she said. "When we make progress
toward our goals, each job that is created lifts this burden for
someone who is better equipped to be a good parent, to build a
stronger community, and to contribute to a more prosperous