July 14, 2014

Yellen testifies today on Fed policy

July 15, 2014 – Federal Reserve Board Chair Janet Yellen will testify before the Senate Banking Committee today and the House Financial Services Committee tomorrow on the state of the economy and the Fed's monetary policy.

This will be her second policy report before Congress since becoming chair and is expected to generate discussion about the Fed's next moves on monetary policy.

Testifying in February, she said she expected the Fed to continue its current policy on quantitative easing. The Fed began a series of large-scale asset purchases in late 2008 to put downward pressure on yields and, among other things, to support mortgage markets. It began tapering these purchases in January, reducing monthly purchases or agency mortgage-backed securities and Treasuries from $85 billion a month, at the top of "QE3," to $35 billion a month through July.

Minutes from the Federal Open Market's June policy meeting indicated the Fed would likely complete its tapering program in October. NAFCU Senior Economist Curt Long said the FOMC is due to meet this month, September, October and December, but the June minutes suggest that FOMC members favored a reduction of $10 billion in purchases after the July and September meetings and $15 billion in October.

The federal funds target rate has remained in the range of 0 to 0.25 percent since 2008, and the Fed has indicated it has no plans anytime soon to change that.