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 "The economy continues to operate considerably short" of the
central bank's objectives of full employment and stable prices,
Yellen said at a swearing-in ceremony at the central bank in
Washington.
"The economy is stronger and the financial system is sounder," added
Yellen, who succeeded Ben Bernanke on February 1. "We have come a
long way, but we have farther to go."
The brief comments were a broad reiteration of what she told two
congressional committees last month: that the United States appears
to be clawing its way back from the 2007-2009 recession but that the
Fed is in no rush to tighten policy.
Speaking clear across the country, San Francisco Fed chief John
Williams gave a more upbeat assessment of the economy, and suggested
that rate hikes could come as soon as next year.
"My own view, based on my own forecast, is that it would be sometime
around the middle of next year," Williams told reporters after a
speech to students at the University of Seattle. "It could be later
or earlier, depending on how the economy does."
Williams said he projects the economy to grow about 2.5 percent this
year, slower than he had earlier projected because of the effects of
an unusually cold weather, but fast enough to bring down the
unemployment rate to 6.25 percent by year's end.
That is down from a 6.6 percent reading in February, said Williams,
who was Yellen's top researcher when she ran the San Francisco Fed
before moving to Washington as Fed vice chair in 2010.
Next year, he projected, 3 percent growth will likely bring
unemployment down to near-normal levels of 5.5 percent by the end of
2015.
Still, he said, because of the lasting damage of the financial
crisis to the economy, the Fed may not raise rates all that high, at
least at first.
"My own view is that we still have significant, if you will,
headwinds to the economy over the next several years that are still
slowing growth in terms of demand, relative to trend, so that we
need a lower real interest rate, fed funds rate, than you would in
say, over history," he said.
The views of the policymakers that head the Fed's 12 regional
reserve banks are sometimes at odds with those of the Fed chair in
Washington.
The differences underscore the challenges Yellen will face in
crafting the future of monetary policy as she heads to her first Fed
policy-setting meeting as chair, later this month.
Dallas Fed President Richard Fisher, one of the Fed's most
vociferous opponents of its massive bond-buying program, made his
differences with Yellen clear in a speech in Mexico City on
Wednesday.
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"There are increasing signs quantitative easing has overstayed its
welcome: Market distortions and acting on bad incentives are
becoming more pervasive," he said of the Fed's asset purchases,
which are sometimes called QE.
Yellen has supported the bond-buying from its beginning, though she
has also lent her weight to the decision late last year to begin
paring the program back, with a view to ending it this year.
The program has resulted in a Fed balance sheet of more than $4
trillion and ballooning reserves at banks, which Fisher and a few
others at the Fed worry could fuel future inflation.
"The real tools that we are focusing on are how we manage the exit
from the current hyper-accommodative monetary policy and how do we
make sure ... that we do it in a way that doesn't allow the current
very large and presently non-inflationary monetary base ... from
becoming inflationary," Fisher said following his speech.
The world's biggest economy expanded at a decent 2.4 percent rate in
the fourth quarter and has slowed this year due in part to severe
weather.
The U.S. unemployment rate is down from a recessionary high of 10
percent in 2009, but it remains high and jobs growth is erratic.
Inflation, meanwhile, is languishing near 1 percent, about half the
Fed's 2 percent target.
"Too many Americans still can't find a job or are forced to work
part time," Yellen said on Wednesday, underscoring her long-standing
focus on the troubled labor market.
"I promise to never forget the individual lives, experiences and
challenges that lie behind the statistics we use to gauge the health
of the economy," she said. "When we make progress toward our goals,
each job that is created lifts this burden for someone who is better
equipped to be a good parent, to build a stronger community, and to
contribute to a more prosperous nation."
(Editing by Lisa Shumaker)
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