Yellen, who took office on Feb 3, did not provide any surprises. The first female head of the Federal Reserve underscored her support for the policies enacted during Ben Bernanke’s tenure, which she helped formulate as Vice Chair.
“His leadership helped make our economy and financial system stronger,” she said in her testimony to the House’s Financial Services Committee. “I pledge to continue that work.”
In her prepared remarks, released before her 10a.m. testimony, Yellen also reiterated December statements that the central bank would not automatically raise benchmark interest rates if unemployment fell below 6.5%.
“Crossing one of these thresholds will not automatically prompt an increase in the federal funds rate,” Yellen said. She added that benchmark interest rates near zero would “likely be appropriate well-past the time that the unemployment rate declines past 6.5%.”
Cashtaggers immediately took note of the “well-past” language.
Feb. 11 at 8:38 AM
The unemployment rate fell to 6.6% in January, prompting concerns that the central bank would put the breaks on the stimulus before the economy could sustain its recovery. Though the current unemployment rate is a significant improvement from the 10% reached in October 2009, the economy remains below ideal employment.
Some investors argue that the unemployment rate is misleadingly optimistic as it excludes Americans who have dropped out of the labor force because they do not believe work is available. About 2.6 million Americans are marginally attached to the workforce, according to data released by the Bureau of Labor statistics on Feb. 7.
Yellen said that the recovery in the labor market is “far from complete.” She highlighted the number of long-term unemployed as an example of the work still required by accommodative monetary policy.
“A highly accommodative policy will remain appropriate for a considerable amount of time after asset purchases end,” she said.
She also said that, though the Federal Reserve still sees a meaningful pick up in the economy and will continue to taper its bond purchases accordingly, the central bank is not acting on a pre-set course. Reports have suggested that the $FED will continue to scale back its bond buying by $10 Billion a month until it is no longer is in the quantitative easing business. The Fed purchased $65 Billion in bonds this month, down $10 Billion from the $75 Billion purchased in January.
Cashtaggers had mixed reviews of Yellen’s testimony. Some argued that the Federal Reserve’s determination to keep interest rates low will soon have adverse consequences.
Feb. 11 at 10:37 AM
Others praised Yellen for not spooking the market.
Feb. 11 at 11:11 AM
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