May 07, 2014

Yellen tells JEC economy still needs support

May 8, 2014 – Federal Reserve Board Chair Janet Yellen told the congressional Joint Economic Committee Wednesday that the economy still needs support despite "substantial improvements" in labor market conditions.

"As always, our policy will continue to be guided by the evolving economic and financial situation, and we will adjust the stance of policy appropriately to take account of changes in the economic outlook," Yellen testified. "In light of the considerable degree of slack that remains in labor markets and the continuation of inflation below the [Federal Open Market Committee's] 2 percent objective, a high degree of monetary accommodation remains warranted."

She indicated the Fed had a positive outlook for economic growth in 2014 and that the Fed would gradually reduce its asset purchasing program, currently at $45 billion a month. She also mentioned potential risks this year from a slowdown in the housing market and geopolitical tensions abroad but said the economy should be supported by less fiscal restraint, gains in household net worth , and stronger foreign economic growth throughout the year.

She did not give specifics on when the Fed would raise the federal funds rate, which she noted may remain below normal levels even after employment and inflation are near mandate-consistent levels.