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Fed Chair Speech  
Released On 2/11/2014 10:00:00 AM For 2/11/2014 10:00:00 AM

In prepared remarks released before her Congressional testimony, Fed Chair Janet Yellen stated that she strongly supports current monetary policy. She expects taper to continue in measured steps if the FOMC outlook is met. She still sees taper as not pre-set and contingent on the labor market and inflation.

Chair Yellen sees forward guidance as an important tool for the Fed. She sees quantitative easing as boosting the economy through lower long-term interest rates.

Even though quantitative easing is planned to be tapered in measured steps, the Fed is still watching the economy. But taper is expected as the recovery advances.

She sees the decline in the labor force participation rate as having cyclical factors and structural factors. But Yellen sees unemployment as still elevated based on broad measures. She stated that she was surprised by weakness in December and January jobs numbers. But she noted that weather may have had a temporary impact.

On what could change the taper path, Yellen said that a notable change in the outlook is what could be the basis for such a decision. She wants to be sure that inflation is moving back toward the 2 percent target.

Chair Yellen believes QE has lowered mortgage rates and supported the recovery in housing—although there has been some slowing in this sector recently.

Yellen sees economic fundamentals calling for low interest rates—to bring unemployment down and to boost inflation to target.

On a question regarding minorities lagging in jobs and income, the Fed Chair indicated that a stronger economy will create jobs in all sectors of the economy. She also stated that the skills gap needs to be addressed. Lower income workers have been disproportionally hurt by the recent recession.

Going back to quantitative easing, Yellen said that the Fed could increase bond purchases if inflation is very low.

Yellen sees progress in the labor market but believes that there is significant way to go.

Regarding proposed legislation to remove the employment portion of the Fed’s dual mandate, she stated that the dual mandate has served well. Yellen sees no conflict between the two parts of the dual mandate of maximum employment and low inflation.

On the issue of the Fed being audited, the chair agrees that Fed finances should be and are audited by the GAO. She stated that monetary policy should be independent and not part of audits although the Fed would answer to Congressional questions on policy.

Overall, Chair Janet Yellen confirmed that monetary policy continues as set in place by her predecessor’s FOMC. Taper continues in measured steps unless exceptional data indicate a faster or slower pace. She supports the Fed’s dual mandate of maximizing employment while keeping inflation low. Essentially, there were no surprises in her Congressional testimony. Equities rose substantially during the Chair’s testimony.