NEW YORK • The United States economy is on a solid course with some hints of inflation so the Federal Reserve is on track for further interest rate hikes, Federal Reserve chair Janet Yellen has said while defending her decision to tighten policy late last year.
In a rare spectacle on Thursday, Dr Yellen spoke on a New York panel alongside her three predecessors who ran the world's most powerful central bank.
She said that, seven years after the brutal financial crisis, the US labour market was now close to full strength, arguing that inflation would not be held down much longer by the strong dollar and low oil prices.
"The US economy has continued to progress in a satisfactory way. We continue to see good job performance, some evidence of inflation moving up, so that was our expectation when we raised rates in December," she said at International House, a New York non-profit residence for students.
"We remain on a reasonable path and I don't think December was a mistake."
The Fed raised its benchmark policy rate last December, the first increase in nearly a decade, to between 0.25 per cent and 0.5 per cent.
Dr Ben Bernanke and Mr Paul Volcker joined Dr Yellen at the conference, and Mr Alan Greenspan appeared via teleconference screens.
Between the four of them, they ran the Fed for a third of its 102- year history. This included Mr Volcker's taming of 1970s runaway inflation, and Mr Greenspan's 18- year run of relative economic stability and financial deregulation that ultimately led to the 2007-2009 Great Recession.
In a casual moderated discussion, they expressed a remarkable amount of agreement over each other's varied handling of the economy. They also agreed that China's growing prominence posed more opportunity than threat.
A hot topic for the panellists was the US election campaign, in which Republican presidential front runner Donald Trump has lambasted the central bank for helping to stoke asset bubbles.
"I certainly wouldn't describe this as a bubble economy," Dr Yellen said, noting a "healing" labour market in which unemployment is 5 per cent, or about where the Fed wants it.
While Mr Volcker admitted that he saw some "over-extended" parts of the financial system, he agreed with Dr Yellen, saying he did not believe the US was in an economic bubble.
Asked about the monetary policy adage in which the Fed takes away the punch bowl just as the party gets going - and whether any of his successors had added too much vodka - Mr Volcker, who ran the Fed from 1979 to 1987, said: "My successors were great, all."