Janet Yellen Says Fed Interest Rate Cut ‘Positive Sign,’ Policy Still Restrictive

Treasury Secretary Janet Yellen said that the Federal Reserve's interest-rate cut Wednesday was “a very positive sign for where the US economy is,” reflecting progress in bringing down inflation and a determination to protect the job market.

“It reflects confidence on the part of the Fed that inflation has come way down and is on a path back to the 2% target, and that the risks with respect to inflation have really meaningfully diminished,” Yellen said at an event hosted by The Atlantic magazine Thursday. “The overriding concern or motive” now is to make sure that the job market “stays strong,” she said.

Yellen, who preceded Fed Chair Jerome Powell in that job, spoke a day after the US central bank lowered its benchmark rate by a half percentage point.

“The stance of monetary policy remains restrictive,” Yellen said. “The expectation is that interest rates will come down further,” she said, highlighting Fed policymakers' new projections, which showed sustained rate reductions into 2026. “But it's of course necessary to watch incoming data and there can always be surprises.”

The Fed's move also reflects that “the risks with respect to inflation have really meaningfully diminished,” Yellen said. The job market remains “normal, healthy,” she said, noting it's not as hot as in 2022 or 2023 when employers were struggling to hire staff. It's “possible to stay on this course,” she said.