Wall Street Journal (08/23/14) Jon Hilsenrath; Brian Blackstone

Speaking at the Federal Reserve Bank of Kansas City’s annual symposium in Wyoming on Friday, U.S. Federal Reserve Chairman Janet Yellen expressed caution about moving quickly away from the U.S. central bank’s low interest rate policies even as the job market improves and inflation inches higher.

“The economy has made considerable progress in recovering from the largest and most sustained loss of employment in the United States since the Great Depression,” Yellen said. “These developments are encouraging, but it speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover.”

Yellen has made an improving job market a centerpiece of U.S. monetary policy discussions, but she and other economists at the conference pointed to confounding job market behavior that is complicating looming Fed decisions on when to raise interest rates. The U.S. jobless rate has fallen sharply in the past year, to 6.2% in July, but Ms. Yellen said she was uncertain whether that drop and other improving labor-market measures indicated an economy getting closer to overheating or one still convalescing from the 2008 financial crisis. Yellen’s tone has subtly shifted in the past few months. In a March speech she expressed confidence that inflation and wages were being repressed by slack in labor markets—such as part-time workers and long-term unemployed—reasons to keep interest rates low. Her remarks Friday show she is less wedded to this view.

New York Times (08/25/14) Binyamin Appelbaum

Leaders of the world’s major central banks made clear in speeches at this year’s conference in Wyoming that they were focused on raising employment and wages. The pursuit of lower inflation has been replaced by a conviction that inflation is actually too low for the good of the economy.

“Central bankers never used to say things like that,” says Alan Blinder, the former U.S. Federal Reserve vice chairman who was criticized for doing so in 1994, and who now attends the conference as an economist at Princeton University. “Now I think you can go to the most hawkish end of the Fed and whoever you pick as the most hawkish will not say that we just shouldn’t pay any attention to unemployment.”

Looming over the conference, however, was the reality that central banks had made limited progress toward achieving these new goals. They also face mounting questions about how much more they have the power to do. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, says it is “very challenging” to determine “how much work is left to be done by monetary policy.” But in a reflection of the sea change in central banking, he added that he would rather err on the side of driving down unemployment rather than retreating too soon.