Make us your home page
Instagram

Yellen expects to stay course

Janet Yellen indicated no rush to boost short-term rates.

Janet Yellen indicated no rush to boost short-term rates.

WASHINGTON — Federal Reserve Chair Janet Yellen sought Tuesday to reassure investors that she will embrace the approach to interest rate policy that her predecessor, Ben Bernanke, pursued before he stepped down as chairman last month.

Yellen told Congress that if the economy keeps improving, the Fed will take "further measured steps" to reduce the support it's providing through bond purchases.

In her first public comments since taking over the top Fed job last week, Yellen said she expects a "great deal of continuity" with Bernanke, who served as chairman for eight years. She signaled that she supports his view that the economy is strengthening enough to withstand a pullback in stimulus but that rates should stay low to further improve a still-lackluster economy.

Her message of continuity at the Fed was a reassuring one for investors, and it contributed to a major rally on Wall Street. The Dow Jones Industrial Average closed the day up nearly 200 points.

Yellen's remarks to a House committee suggested that the Fed will keep its key short-term rate near zero for a prolonged period.

"The recovery in the labor market is far from complete," said Yellen, the first woman to lead the Fed in its 100 years, an indication that the Fed is in no hurry to boost short-term rates.

She said the Fed is monitoring volatility in global markets but doesn't think it currently poses a serious risk to the United States.

"Since the financial crisis and the depths of the recession, substantial progress has been made in restoring the economy to health and strengthening the financial system," Yellen said in her testimony for the House Financial Services Committee. "Still, there is more to do."

Some Republicans expressed concern that the Fed's extraordinary support could ignite high inflation or destabilize financial markets. The committee chairman, Jeb Hensarling, R-Texas, a critic of the Fed, said there were "clearly limits to what monetary policy can achieve."

Direct responses

Several committee members praised Yellen for breaking down a gender barrier at the Fed. Rep. Gregory Meeks, D-N.Y., told Yellen she would serve as an inspiration for his three daughters and said: "You have done it the old-fashioned way. You have earned it."

The new Fed chair drew praise for her direct responses. Rep. Shelley Moore Capito, R-W.Va., said she'd been able to understand more of Yellen's answers than she had the responses of Bernanke or Alan Greenspan.

At times, Yellen was blunt. Asked what impact a failure to raise the federal debt limit would have, she said, "Frankly, it would be catastrophic to not raise the debt limit."

She was pressed by some Republicans to explain why she opposed legislation that would subject the Fed to audits by the Government Accountability Office on its rate decisions. Yellen noted that the Fed is already subject to GAO audits in some areas. But she said that allowing the GAO to second-guess interest-rate actions would subject the Fed to improper political influence.

Many economists think the Fed bond buying, which totaled $85 billion a month during 2013, will be reduced in $10 billion increments this year until the purchases are eliminated in December. The purchases of Treasury and mortgage bonds are aimed at stimulating the economy by keeping long-term loan rates low.

Yellen said the Fed won't likely change its pace of bond reductions unless it sees a "notable change" in the economic outlook. The Fed's three rounds of bond purchases have driven its holdings above $4 trillion — four times its level before the financial crisis struck with force in 2008. Eventually, it will need to sell those investments without sending interest rates soaring or otherwise destabilizing markets.

Yellen expects to stay course 02/11/14 [Last modified: Tuesday, February 11, 2014 8:11pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Kidpreneurs — and adults — capitalize on gooey, squishy Slime craze

    Retail

    First it was Play-Doh. Then Gak. There have been dozens of variations for sale of the oozy, gooey, squishable, stretchable kids' toy through the generations.

    Aletheia Venator and Berlyn Perdomo demonstrate the stretchiness of their slime. - Berlyn Perdomo and her friend, Aletheia Venator, both 13, make and sell slime which can be seen on their instagram site @the.real.slimeshadyy [JIM DAMASKE   |   Times]
  2. The last farmer of Florida's prized Zellwood corn is thinking of packing it in

    Consumer

    MOUNT DORA — Hank Scott steps out of his pickup between the long rows and snaps off an ear that grows about bellybutton-high on the forehead-high stalks.

    Hank Scott, co-owner of Long and Scott Farms, shucks an ear of corn on the farm in Mount Dora, Fla., on Wednesday, May 10, 2017. The farm specializes in Scott's Zellwood Triple-Sweet Gourmet Corn. LOREN ELLIOTT   |   Times
  3. Law firm's Russia ties prove nothing about Trump

    Business

    The statement

    "Law firm @POTUS used to show he has no ties to Russia was named Russia Law Firm of the Year for their extensive ties to Russia. Unreal."

    Sen. Chris Murphy, D-Conn., stands during a media availability on Capitol Hill, Monday, June 20, 2016 in Washington. A divided Senate blocked rival election-year plans to curb guns on Monday, eight days after the horror of Orlando's mass shooting intensified pressure on lawmakers to act but knotted them in gridlock anyway — even over restricting firearms for terrorists. (AP Photo/Alex Brandon)
  4. Pasco county lawyer disbarred for taking woman's money

    Real Estate

    NEW PORT RICHEY — The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis.

    The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis. 
[2016 booking photo via Pasco County Sheriff's Office]
  5. Rick Scott signs package of tax breaks

    State Roundup

    TALLAHASSEE — Gov. Rick Scott signed a tax cut package Thursday that — while vastly scaled back from what he wanted — eliminates the so-called "tampon tax" and offers tax holidays for back-to-school shoppers and Floridians preparing for hurricane season.

    Florida Governor Rick Scott signed a tax cut package that will cost state coffers $91.6 million during the upcoming year. [Joe Raedle | Getty Images]