Yellen says Fed can obtain inflation objectives

SANTA CRUZ, California, May 28 (Reuters) Globalization does not hurt the Federal Reserve's ability to attain its inflation objectives, San Francisco Fed President Janet Yellen 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 told a conference yesterday on ''The Euro and the Dollar in a Globalized Economy'' at the University of California Santa Cruz.

The speech did not address the current US economic or monetary policy outlook.

Globalization may force a ''recalibration'' of Fed policy responses, said Yellen, a voting member of the Federal Open Market Committee this year.

For example, the level of labor market slack associated with price stability -- or NAIRU -- could in principle be affected by global issues, she said.

''Globalization may have an effect on wage/price dynamics and, as such, may require that monetary policy be recalibrated to take these changes into effect,'' Yellen said.

A similar recalibration took place in the latter half of the 1990s in response to a surge in U.S. productivity growth, she noted.

By contrast, Yellen said the impact on US prices from a surge in cheap imports from China was probably ''only modest'' and not a major source of disinflation.

REUTERS SHB KN0959