"One thing I worry about is that if we are late, in this environment, with $2.7 trillion of excess reserves, the consequences might be more dramatic than in previous times. If lending begins to surge and those reserves start to pour out of the banking system, that's going to put pressure on inflation."
"Inflation has moved up in recent months" she acknowledged, "but decisions about the path of the federal funds rate remain dependent on our assessment of incoming information and the implications for the economic outlook," Yellen told Congress on 15 July."The Fed does need to be quite cautious with respect to monetary policy. We have seen false dawns in the past."With wages growing slowly and raw material prices generally flat or moving downward, firms are not facing much in the way of cost pressures that they might otherwise try to pass on," the Fed said in a report accompanying Yellen's testimony.