Fed has more work to do to help US economy, says Yellen

Janet Yellen being sworn in at the Senate committee hearing yesterday. Picture: AP

Janet Yellen, President Barack Obama’s nominee to lead the Federal Reserve, thinks the US central bank has “more work to do” to help an economy and a labour market that are still under-performing.

“I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy,” Ms Yellen, the Fed’s vice chair, said in remarks prepared for delivery to the Senate Banking Committee.

Her testimony appeared aimed in part at pre-empting Republicans on the panel who are critical of the Fed’s unorthodox and aggressive monetary policy.

At the same time, her prepared remarks bolstered expectations in financial markets that the central bank would continue its easy money campaign to nurse the US economy back to health.

If confirmed by the senate, Ms Yellen would be the first woman to lead the US central bank.

She said the economy and labour market were performing “far short” of their potential, while price pressures remained muted.

“Inflation has been running below the Federal Reserve’s goal of 2% and is expected to continue to do so for some time.”

US stock and bond futures both rose and the dollar slipped against the euro after news of the testimony hit traders’ screens, continuing a trend that began earlier on Wednesday on speculation that her remarks would emphasise a need to support the economy.

Financial markets have long viewed Ms Yellen as a policy dove more concerned about the high level of unemployment than about the risk that the Fed’s efforts to spur stronger growth might lead to an unwanted rise in inflation.

She is widely expected to provide continuity with the ultra-easy monetary policies of Fed chairman Ben Bernanke, whose term expires on Jan 31.

The committee needs to vet Ms Yellen’s nomination before sending it to the full senate for final consideration.

Democrats control 55 of the Senate’s 100 seats, which means the 67-year-old former economics professor needs backing from just five Republicans to reach the 60-vote threshold necessary.

— Reuters


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