Janet Yellen Is 'Doing The Right Thing'

The Federal Reserve sent a dovish message to the market on Wednesday. It removed the word "patient" from its statements and indicated that it will not raise interest rates in a hurry.

Bank of America Merrill Lynch Global Research's Ethan Harris was on CNBC Thursday to discuss if, as the Chair of the Board of Governors of the Federal Reserve System, Janet Yellen is doing the right thing.

Realistic Assessment

"I think she is doing the right thing," Harris began. "We have had some weak data in the U.S.; the Fed is finally acknowledging how soft the inflation numbers are. So, she is throwing some sand in the gears of this whole idea that the Fed is rushing to the exit.

"Inflation is a long, long way off, and there's no rush for the Fed to be hiking interest rates. So, I like what I heard from the Fed yesterday. It seemed much more [of a] realistic assessment of the economy."

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Inflation Not A Risk

Harris was asked if the Fed keeps the rate near zero for long, wouldn't that mean the dollar would withstand weakening, oil prices would rebound and wages would not rise? Additionally, he was asked if the American economy is really in that bad of a shape.

He replied, "I think what's important here is that the Fed correctly recognizes that the big risk to the U.S. is not inflation. It's about getting a full recovery in the economy."

He continued, "We have had a disappointing five-year recovery. We have seen what can happen and occur in a region like Europe if you let your economy languish too long. We have got to get the economy really, fully back on its feet.

"Then you normalize interest rates. But, we don't want to sit on this kind of semi-recovery forever. It leaves us vulnerable to the next shock," Harris concluded.