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.