WASHINGTON (MCT) — Federal Reserve Chairwoman Janet L. Yellen told Senators Tuesday that the economy still has not fully recovered the recession and did not indicate that central bank policymakers would soon begin to raise rock-bottom interest rates.
“Although the economy continues to improve, the recovery is not yet complete,” Yellen told the Senate Banking Committee.
The labor market has continued to improve and inflation is beginning to move toward the Fed’s 2 percent annual target after a long period of running well below that level, she said.
Despite an economic contraction in the first three months of the year, Yellen and other Fed officials expected “economic activity will expand at a moderate pace over the next several years.”
The sharp first-quarter slowdown “appears to have resulted mostly from transitory factors,” she said, echoing economists who largely attributed the contraction to severe weather in much of the country.
But recent economic indicators “suggest that growth rebounded in the second quarter.”
The housing market is one area of concern because it “has shown little recent progress.”
For those reasons, Yellen said Fed policymakers expect to keep easy-money policies in place for a while.
The economy added 288,000 net new jobs in June and the unemployment rate fell to 6.1 percent, its lowest since September 2008.
With the labor market improving — June was the fifth-straight month in which job growth exceeded 200,000 — pressure is building on the Fed to start raising its rock-bottom interest rates.
The Fed has been reducing its monthly bond-buying stimulus program, and Yellen said central bank policymakers plan to end the effort in October.
The Fed’s benchmark short-term interest rate has remained near zero since late 2008 and policymakers have indicated they don’t plan to start raising it until mid-2015.
Yellen offered no hint that the Fed would start raising interest rates earlier. “Our evaluation will not hinge on one or two factors but rather will take into account a wide range of information, including measures of labor-market conditions, indicators of inflation and long-term inflation expectations, and readings on financial developments,” she said.
Los Angeles Times
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