[November 20, 2013]WASHINGTON (AP) — Janet Yellen says a
"strong majority" of Federal Reserve officials think the Fed's
low-interest-rate policies have supported a still-recovering U.S.
economy.
Responding to questions from members of the Senate Banking
Committee, Yellen said the U.S. economy would likely be weaker if
the central bank had not acted aggressively.
Yellen's responses were released Tuesday, two days before the
committee is expected to vote to back her nomination to succeed Ben
Bernanke as Fed chairman.
In letters to the committee, Yellen defended the Fed's monthly bond
purchases, which have been intended to keep long-term rates down to
encourage borrowing and spending. Critics have charged that the bond
purchases haven't helped the economy and have raised the risks of
high inflation or asset bubbles.
"While monetary policy is not a panacea for all of the nation's
economic difficulties, our economic situation would almost certainly
be far worse had the Federal Reserve not acted aggressively," Yellen
said in response to questions from Sen. David Vitter, R-La., a
critic of the Fed's bond buying who has said he'll vote against her
nomination.
Yellen's remarks suggested that the Fed is standing behind its $85
billion a month in bond purchases for now. She said it's monitoring
potential risks.
Sen. Elizabeth Warren, D-Mass., asked Yellen whether she thought the
Fed should lower the 6.5 percent unemployment level it's set as a
threshold that would have to be reached before it would consider
raising short-term rates. Many economists think the Fed will soon
lower that threshold unemployment rate to 6 percent.
Yellen noted that the Fed, in its latest economic forecast, viewed
an unemployment rate between 5.2 percent and 5.8 percent as a level
the economy can achieve in the long run.
Yellen did not endorse lowering the threshold rate to 5 percent to 6
percent before the Fed begins raising short-term rates. But she
repeated comments Bernanke has made that the Fed's policies will
likely remain accommodative "long after" the unemployment threshold
has been reached.
After the Banking Committee likely backs Yellen's nomination
Thursday, the timing of a vote in the full Senate is uncertain. Some
senators have said they planned to hold up her nomination as
leverage on other matters. But both Democratic and Republican
senators have said they expect Yellen to win confirmation.
Bernanke's second four-year term as chairman ends Jan. 31.
Yellen made clear during a confirmation hearing last week that she's
prepared to support the Fed's extraordinary efforts to bolster the
economy until there are more signs of a sustained rebound in growth.
