There's a new Fed chief in town.
made her brand spanking debut on Capitol Hill today.
Yellen testified before the House Financial Services Committee
about her intentions as Federal Reserve chair now that she's
supplanted former chair Ben Bernanke. As with Bernanke's frequent
Capitol Hill testimonies and press conferences, Wall Street hung
on Yellen's every word.
Here are some highlights of what she said this morning:
Janet Yellen on the state of the U.S. economy:
- At 6.6%, "the unemployment rate is still well above levels
… consistent with maximum employment."
- The recent decline of emerging markets poses no significant
threats to the U.S. economy.
Yellen on QE3, the Fed's ongoing bond-buying
- While 6.5% unemployment remains a threshold for considering
raising short-term interest rates from near zero, but hitting
that level "will not automatically prompt" the Fed to raise
- In the meantime, the Fed is likely to continue reducing its
bond purchases. What had been an $85 billion-per-month
bond-buying stimulus measure has been reduced to $65 billion in
the last two months. Yellen expects the Fed to continue
reducing - i.e. "
," as Bernanke once infamously called it - its bond-buying
program as the economy improves.
- "If the economy continues to improve, we're likely to
continue reducing asset purchases in measured steps," Yellen
On how Fed policy may change with her replacing
- Yellen promised a "great deal of continuity" between her
regime and Bernanke's, and she supports the current policy that
- "The purpose (of the current policy) is to spur spending in
the economy, and to achieve more economic growth. We certainly
saw a pickup in
activity, and a very meaningful increase in house prices, which
has improved the security of people in their mortgages …
Housing is a good example of where the Fed policy has been
- "Since the beginning of this program, we have seen
unemployment decline 1.5%."
On whether last month's weak jobs report will convince
the committee to slow its tapering:
It's important not to jump to conclusions. What would cause the
committee to consider the cause is a notable change in the
outlook. We do need to see growth at an above-trend pace to see
continued improvement in the labor market."
Stocks were up very slightly while Yellen spoke this morning.
Because she is essentially vowing to maintain the status quo,
there wasn't a whole lot for investors to sink their teeth
The next Federal Open Market Committee (FOMC) meeting isn't
until March 18-19. Stay tuned.