Yellen Describes Rebound in U.S. Economy
Economy
Yellen Describes a Winter Pause, but Now a Rebound, in Economy
Yellen Speaks on U.S. Economic Future
Janet L. Yellen, the chairwoman of the
Federal Reserve, testified before the Congressional Joint Economic
Committee that she expects the economy to expand at a faster pace than
it did last year.
Credit Drew Angerer/Getty Images
WASHINGTON
— Janet Yellen, the Federal Reserve chairwoman, said Wednesday that the
economy “paused” in the first quarter, but that a rebound was happening
and the Fed continued to expect faster growth during the rest of the
year.
Ms.
Yellen’s comments, in testimony before the Congressional Joint Economic
Committee, suggested the Fed’s economic optimism had not been shaken by
trade data that might show the first quarter was even weaker than the government reported last week.
“With
the harsh winter behind us, many recent indicators suggest that a
rebound in spending and production is already underway,” Ms. Yellen
said.
She
cautioned, however, that the recovery of the housing market had stalled
and that “heightened geopolitical tensions” could undermine the
recovery.
Ms.
Yellen did not provide any new information about the timing of the
Fed’s retreat from its stimulus campaign, to the frustration of
Republicans on the committee.
Representative
Kevin Brady, the Texas Republican who is chairman of the committee,
said repeated extensions of the campaign had increased the risk of
higher inflation.
“This ‘don’t worry, be happy’ monetary message isn’t working,” he said.
Ms.
Yellen, who suggested at a March news conference that the Fed might
begin to raise interest rates about six months after it ended bond
purchases, carefully avoided affirming those comments on Wednesday.
Investors generally expect the Fed to start raising rates around the
middle of 2015. Ms. Yellen said only that the timing would be determined
by the progress of the economic recovery.
She
said the Fed would keep its grip on inflation. “I do believe we have
the tools and the will and the determination to remove monetary
accommodation at the appropriate time to avoid overshooting our
inflation objective,” she said.
Ms.
Yellen and other Fed officials are somewhat more concerned that the
Fed’s policies will destabilize financial markets. Ms. Yellen said that
the Fed was watching closely for signs of excessive speculation and that
“some reach-for-yield behavior may be evident.” But she added that such
signs were limited to small pockets and the Fed did not see broad
reasons for concern.
She said stock market valuations “remain within historical norms.”
The
Fed is steadily reducing its monthly purchases of Treasury and
mortgage-backed securities, now at $45 billion a month, and Ms. Yellen
affirmed that the central bank planned to end those purchases in the
fall. It must then decide when to start raising short-term interest
rates, which have been held near zero since December 2008.
Ms.
Yellen emphasized Wednesday that the economy still needed a lot of
help. While the unemployment rate has declined, she noted that other
measures of the labor market continued to reflect that many people could
not find full-time work.
“While
we have seen substantial improvement in labor market conditions and the
overall economy since the financial crisis and severe recession, we
recognize that more must be accomplished,” she said.
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