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. Another Pinellas foreclosure auction fools bidders, raises questions

    Real Estate

    For the second time in six weeks, a company connected to lawyer Roy C. Skelton was poised to profit from a Pinellas County foreclosure auction that confused even experienced real estate investors.

    A Palm Harbor company bid  $112,300 for  this Largo townhome at a foreclosure auction July 21 not realizing the auction involved a second mortgage, connected to lawyer and  real estate investor Roy Skelton -- and that the bank could still foreclose on the  first mortgage.
[SUSAN TAYLOR MARTIN   |   Times]
  2. Clearwater-based USAmeriBank acquired by New Jersey bank in $816 million deal

    Banking

    CLEARWATER — USAmeriBancorp, Inc., based in Clearwater, is being acquired by New Jersey's Valley National Bancorp in an $816 million deal, it was announced today.

    Joe Chillura, CEO of USAmeribank, shown inside a branch in Ybor City in this file photo.
[KATHLEEN FLYNN l Times]
  3. Outback Steakhouse sees growth in U.S. and Brazil markets in second quarter

    Retail

    TAMPA — Restaurant sales were up at Outback Steakhouse and Carrabba's Italian Grill during the second quarter of 2017, but Bonefish Grill continues to lag at Tampa-based Bloomin' Brands.

    The Outback Steakhouse, on 4088 Park St. N, is showin on July 26, 2017. Restaurant sales were up at Outback Steakhouse  and Carrabba's Italian Grill during the second quarter of 2017, but Bonefish Grill continues to lag at Tampa-based Bloomin' Brands. [SCOTT KEELER | Times]
  4. Controversial landfill site could be rechristened as industrial recruiting land in Pasco

    Economic Development

    The east Pasco property of Angelo's Aggregate Materials, which failed to obtain a state environmental permit to be developed as a garbage landfill, is being studied as a potential 1,000-acre mega site for industrial recruitment.

  5. Marriott opening new hotel on Clearwater Beach

    Tourism

    CLEARWATER BEACH — A dual-branded Marriott hotel with a tongue-twister name is opening on Clearwater Beach in August. The Residence Inn Tampa Clearwater Beach and SpringHill Suites Tampa Clearwater Beach will have 255 suites total, connected by a lobby.

    A dual-branded Marriott hotel called the Residence Inn Tampa Clearwater Beach and SpringHill Suites Tampa Clearwater Beach will open in August in Clearwater Beach. Pictured is a rendering.
[Courtesy of Hayworth PR]