The unemployment rate stood at 5.1 percent in September, slightly above the 4.9 percent rate that officials estimate would satisfy their mandate. The Bureau of Labor Statistics will release the October jobs data Friday.
Job Market
“I see under-utilization of labor resources as having diminished significantly since earlier in the year, although recently we’ve seen some slowdown in the pace of job gains,” Yellen said.
The Fed has missed its 2 percent inflation target for more than three years, and its Oct. 28 statement said they need to be “reasonably confident” that prices will rise toward their goal before raising rates.
“If we were to move, say in December, it would be based on an expectation, which I believe is justified, that -- with an improving labor market and transitory factors fading -- that inflation will move up to 2 percent,” Yellen said.
Fischer went a step further in remarks later on Wednesday in Washington, saying that the Fed isn’t that far off the mark, even now.
"We’re not that far from the 2 percent target,” Fischer said, pointing to core inflation and explaining that he believes factors holding prices back -- the plunge in oil and a rising dollar -- should prove transitory. "Those are things that can’t go on forever."
Michael Gapen, chief U.S. economist at Barclays Capital Inc. in New York, said Yellen’s comments on inflation served to deflect an argument outlined in October by Fed Governor Lael Brainard that the central bank should wait to see movements in inflation before raising rates.
Outlook Dependent
Yellen rejected that argument in favor of a “forecast-based decision,” Gapen said.
“The divide in the committee was essentially over whether they should move in advance of inflationary pressure or wait to see it,” he said. “This clearly says the forecast-based side won that argument.”