Yellen on monetary policy in a global environment

A depreciating dollar could stimulate aggregate demand and raise inflation somewhat, and "would appear to call for a response of tighter policy," Yellen said.

Yellen -- a voting member of the policy-setting Federal Open Market Committee in 2006 -- said Fed policy impacts both interest rates and the dollar.

"The tendency of the dollar to appreciate in response to a tighter monetary policy also creates a direct link to inflation via lower import prices," she said.

"From the perspective of monetary policy, globalization does matter ... even so, globalization does nothing to imperil the Fed's ability to attain its inflation objectives," Yellen said at a conference on "The Euro and the Dollar in a Globalized Economy."

Speech by Janet L. Yellen, President and CEO of the Federal Reserve Bank of San Francisco at The Euro and the Dollar in a Globalized Economy Conference, U.C. Santa Cruz, Santa Cruz, CA, 27 May 2006.

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