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Yellen: Around Six Months…Or Longer?

There were two key takeaways for investors from Federal Reserve Chairwoman Janet Yellen's press conference after leading her first meeting of the Federal Open Market Committee - do not expect interest rates to rise until mid-2015, and, if inflation remains subdued, the zero bound could continue for even longer.

Asked by a reporter how long it would take after the Fed completes tapering its asset purchases for the FOMC to hike the federal funds rate, Dr. Yellen replied, "Something on the order of around six months or that type of thing, but you know, it depends … what conditions are like." With tapering expected to end at the latest by December, that suggests a first rate hike in the second quarter of 2015.

However, Dr. Yellen made clear that such a move depends on the level of inflation at the time. "If inflation is persistently running below our 2 percent objective, that is a very good reason to hold the funds rate at its present range for longer." The inflation measure which the Fed tracks most closely, Personal Consumption Expenditures excluding food and energy, is now at 1.1 percent.

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