Yellen Says Gradual Rate Hikes Likely to Be Appropriate

The video discusses the Federal Reserve's decision to increase the federal funds rate, highlighting the ongoing economic strength and the need for gradual rate hikes to maintain a healthy labor market and stabilize inflation. It explains the concept of the neutral rate, which is currently low, and the expectation for it to rise over time. The video also covers future projections for the federal funds rate and emphasizes the uncertainty in the economic outlook, noting that policy is not predetermined.

What is the primary reason for the Federal Reserve's decision to gradually increase the federal funds rate?

• To reduce economic growth

• To increase the federal deficit

• To stabilize inflation around 2%

• To decrease employment levels

What does the neutral federal funds rate signify?

• A rate that neither stimulates nor restricts the economy

• A rate that promotes rapid economic growth

• A rate that causes inflation to rise

• A rate that leads to high unemployment

Why is the federal funds rate not expected to rise significantly to reach a neutral policy stance?

• Because inflation is decreasing rapidly

• Because employment levels are declining

• Because the neutral rate is currently low

• Because the neutral rate is historically high

What is the projected federal funds rate at the end of 2019?

• 1.4%

• 2.1%

• 2.9%

• 3.5%

How does the Federal Reserve plan to respond to changes in the economic outlook?

• By setting a fixed policy course

• By adjusting the federal funds rate as needed

• By maintaining the current rate indefinitely

• By ignoring economic risks