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Yellen Expects to Continue Tapering as Economy and Unemployment Recover at a Slow Pace

“WASHINGTON-The new leader of the Federal Reserve, Janet Yellen, on Tuesday told lawmakers she expects there to be “a great deal of continuity” in the central bank’s policies in testimony prepared for her first congressional appearance since becoming the central bank’s first chairwoman.

“I served on the Committee as we formulated our current policy strategy and I strongly support that strategy,” Ms. Yellen said in her remarks prepared for delivery before the House Financial Services Committee. The hearing is scheduled to start at 10 a.m. EST.

Ms. Yellen signaled that recent soft economic data has not swayed the central bank from a strategy of trimming its monthly bond purchases by $10 billion at each of its policy meetings this year. She repeated language from the Fed’s January policy statement, saying that if the economy improves as the Fed expects, the Fed “will likely reduce the pace of asset purchases in further measured steps at future meetings.” She also emphasized that the bond-buying program is “not on a preset course” and officials will base their decisions about the pace of the program on their economic outlook as well as their view of the costs and benefits of the program.

The Fed cut the bond purchases to $65 billion per month at its January meeting. The program aims to spur investment, hiring and spending by pushing down long-term borrowing costs. The Fed’s next meeting is March 18-19.

Surveying the economy, Ms. Yellen said that “the recovery in the labor market is far from complete,” despite progress made in the last year. The jobless rate, which stood at 6.6% in January, is still “well above levels” that Fed officials consider sustainable by a healthy economy, she said.

Ms. Yellen also pointed to a number of signs other than the unemployment rate that suggested the labor market is still weak, including the high percentage of unemployed people who’ve been out of work for more than six months and the large number of people who are working part-time but would prefer to have full-time jobs.

“These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market,” Ms. Yellen said…..”


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