February 11, 2014

Yellen plans to stay Fed's course

Feb. 12, 2014 – Federal Reserve Chair Janet Yellen on Tuesday testified that she will continue the Fed's current policy on quantitative easing as she delivered her first monetary policy report to the House Financial Services Committee.

Yellen will also testify Thursday before the Senate Banking Committee.

Yellen said she was surprised by disappointing job growth in December and January, but that she shares the Fed's optimistic outlook for economic growth in the coming year, and that unless there is a "notable change" in the Fed's assessment of the economy, it will continue to cut back on its monthly bond purchases.

In response to questions about government-sponsored enterprise reform, Yellen said the role of the government must be explicit, and that a new system should not create systemic risk like the current housing finance system does. NAFCU continues to advocate housing finance reform that assures guaranteed access to the secondary mortgage market for credit unions, and prioritizes loans based on quality instead of volume.

After a two-day policy meeting in January, the Federal Open Market Committee announced the Fed will taper its asset-purchase program by another $10 billion beginning this month, to a pace of $65 billion a month, but is leaving its federal funds rate target unchanged for now. This follows the Fed's decision to begin tapering asset purchases by $10 billion in January, to a pace of $75 billion a month. NAFCU Chief Economist David Carrier is expecting the Fed to continue to scale back its asset purchase program unless the economy gets worse.

Yellen was sworn in as Fed chair on Feb. 3. NAFCU's board met with Yellen at Federal Reserve Board headquarters in December 2012 on issues important to the Fed and credit unions.