By Don Lee
7:55 AM PST, February 11, 2014
WASHINGTON -- In her first congressional appearance as the leader of the Federal Reserve, Janet L. Yellen suggested Tuesday that the central bank was likely to keep scaling back its signature stimulus program despite recent signs that economic growth may be losing some momentum.
Yellen, who succeeded Ben S. Bernanke this month to become the first female chair of the Fed, said she expected "a great deal of continuity" in the central bank's monetary policy. The Fed in December, seeing an improved economic outlook, made a $10-billion reduction to its $85-billion-a-month bond-buying stimulus, and it followed up with another $10-billion cut last month, with Bernanke signaling that policymakers would likely stay the course unless the economic outlook changes significantly.
Yellen reinforced that thinking Tuesday during her appearance before the House Financial Services Committee. The Fed "will likely reduce the pace of asset purchases in further measured steps at future meetings," she said in prepared remarks.
The new Fed chair, who is widely seen in markets as a strong proponent of Fed stimulus to boost growth and lower unemployment, noted that challenges remain in the labor market. She mentioned specifically the large number of long-term unemployed and the many millions who are working part time but want full-time jobs -- elements that are not captured in the nation's unemployment report, which has dropped fairly rapidly in recent months to stand at 6.6% in January.
In her prepared remarks, Yellen did not mention the weak back-to-back monthly jobs reports or other recent signals of slowing growth, such as weaker-than-expected manufacturing orders and car sales.
She said the Fed was closely watching the recent volatility in global financial markets triggered by concerns of a Fed pullback of stimulus and weak economic underpinnings in emerging markets. However, Yellen said that "at this stage these developments do not pose a substantial risk to the U.S. economic outlook." She said the Fed continues to expect moderate economic growth.
Yellen reiterated the Fed's position that the central bank will maintain an easy-money policy for a "considerable time after asset purchases end" -- a reference to the Fed's benchmark short-term rate that has been held near zero since late 2008, during the depths of the Great Recession.
"Since the financial crisis and depths of the recession, substantial progress has been made in restoring the economy to health and in strengthening the financial system," she said. "Still, there is more to do."
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