Yellen Says Fed Will Likely Continue To Taper QE3
February 11, 2014 by UPI - United Press International, Inc.
WASHINGTON, Feb. 11 (UPI) — The U.S. Federal Reserve will likely continue to reduce its asset purchasing program, Fed Chairwoman Janet Yellen told a Congressional panel Tuesday morning.
“If incoming information broadly supports the [Fed's Open Market] Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings,” Yellen told members of the Congressional Financial Services Committee.
The statement was a shoot-from-the-hip departure from the veiled statements traditionally made by the head of the country’s central bank, but takes a page from Yellen’s predecessor Ben Bernanke, who move the bank toward more transparent operations and policies.
Yellen said the Fed’s policymakers could be expected to maintain a consistent strategy during the current phase of the economic recovery. “Turning to monetary policy, let me emphasize that I expect a great deal of continuity in the FOMC’s approach to monetary policy,” she said.
Yellen said the recovery accelerated in the second half off 2013. In a prepared statement, Yellen said, “the pickup in economic activity has fueled further progress in the labor market. About 1.25 million jobs have been added to payrolls since the previous Monetary Policy Report last July, and 3.25 million have been added since August 2012, the month before the Federal Reserve began a new round of asset purchases to add momentum to the recovery.”
Yellen’s appearance on Capitol Hill is the first since the Labor Department’s Employment Situation report issued Friday that said 113,000 jobs had been added to the economy in January, far short of expectations.
The report mirrors December’s Employment Situation report that said 75,000 jobs were added to the economy, well under the average of 194,000 per month for 2013.
As such, Fed observers will key in on Yellen’s statements on the labor market, with some expecting the Fed’s decision to taper back on what was an $85 billion per month asset purchasing program may have been premature.
The Fed pulled back to $75 billion in January and reduced that by another $10 billion for February.
Yellen made no mention in her prepared remarks about the two consecutive reports that showed a sharp reduction in new jobs.
However, she told members of the panel that the labor market was more complicated than the critical unemployment rate might otherwise indicate.
“Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high,” she said.
“These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market,” she said.
In the past two months, the unemployment rate moved from 7 percent to 6.6 percent, a five-year low.