Tuesday, October 13th12.1°C

Yellen says Fed is monitoring softer economic data to see if recent slowdown is temporary

WASHINGTON - Federal Reserve Chair Janet Yellen noted Thursday that some recent economic data have pointed to weaker-than-expected gains in consumer spending and job growth. She said the Fed will be watching to see whether the slowdown proves only a temporary blip caused by severe winter weather.

Yellen told the Senate Banking Committee that the Fed will be alert to upcoming data to make sure that the U.S. economy keeps strengthening.

"We have seen quite a bit of soft data over the last month or six weeks," Yellen said. "We need to get a firmer handle about how much of the softer data can be explained by the weather."

Responding to a question, Yellen repeated the Fed's assurances that its pullback in stimulus for the economy is "not on a preset course" and could be modified if there was a "significant change" in the Fed's outlook. The Fed is gradually reducing its monthly bond purchases, which have been intended to keep long-term loan rates low to encourage spending and growth.

Yellen said that while she was open to changing the pace of the Fed's reductions in bond purchases, "I wouldn't want to jump to conclusions" that such a change will be needed.

Yellen repeated remarks she made to a House committee earlier this month that the job market's recovery is "far from complete." She said she expects Fed policies to favour low interest rates "for quite some time."

Yellen's appearance Thursday completed her first twice-a-year report to Congress since becoming Fed chair this month. Her Senate appearance had been postponed by a snowstorm that shut federal offices in Washington on Feb. 13.

In both her House and Senate appearances, Yellen sought to emphasize policy continuity with her predecessor, Ben Bernanke, who stepped down last month after eight years leading the central bank.

Yellen said that she, like Bernanke, believed the economy is strengthening enough that the Fed can gradually pull back its monthly bond purchases.

The Fed has cut the pace of bond purchases at both its most recent meetings. It reduced the original $85 billion monthly pace in December and again in January in $10 billion steps to a current level of $65 billion.

Many economists think that as long as the economy keeps improving, the Fed will keep cutting the bond purchases by $10 billion at each meeting this year until ending the program in December.

The Fed has stressed that it's standing by a plan to keep a key short-term rate at a record low near zero for an extended period. At the past two meetings, it has said short-term rates will remain low "well past" the time unemployment drops below 6.5 per cent. The unemployment rate is now 6.6 per cent.

Many economists think the first rate hike won't occur until late 2015. But minutes of the Fed's last meeting showed that "a few" policymakers felt it might be appropriate to make the first move to raise short-term rates "relatively soon."

The Fed has held its benchmark for short-term rates near zero since December 2008.

The discussion revealed in minutes of the Jan. 28-29 meeting, released last week, drew the attention of financial markets. The "few" Fed officials who raised the possibility of a rate hike weren't identified.

But some Fed officials have worried that all the moves to provide support for the economy through trillions of dollars in bond purchases and ultra-low rates could eventually spark inflation pressures.

But economists believe this Fed group remains in the minority. Yellen and many other Fed officials say the economy still needs support from the Fed until the job market and economic growth improve further. They note that inflation remains well below the Fed's 2 per cent target.

The Canadian Press

Read more Business News


Recent Trending

Today's Market
S&P TSX13867.92-96.44
S&P CDNX555.21+2.95
S&P 5002009.79-7.67
CDN Dollar0.7691+0.0001
Natural Gas2.504-0.031

Okanagan Companies
Pacific Safety0.215-0.010
QHR Technologies Inc1.22-0.03
Metalex Ventures0.07+0.02
Russel Metals20.96-0.30
Copper Mountain Mining0.60-0.06
Colorado Resources0.07+0.00
ReliaBrand Inc0.022-0.002
Sunrise Resources Ltd0.02+0.00
Mission Ready Services0.075-0.005
Decisive Dividend Corp3.25+0.14
Diamcor Mining1.00+0.03



2127452318 Poplar Point Drive
5 bedrooms 5 baths
more details
Click here to feature your property
Please wait... loading

Income for life?

Photo: Thinkstock.comIn almost every conversation I have with clients these days, the topic swings to interest rates. What direction they’re going, how long will they stay where they are and how...

Perfect (reno'd) home

Photo: Thinkstock.comHow many times have you found a home in the perfect location, but it needs too much work as per the home inspection? There is a great program available through most lenders that w...

5 Claim misconceptions

Photo: Thinkstock.comIf you have been hurt in an accident or as a result of medical negligence you will likely look to your friends and family for some advice on how to deal with the situation. These ...



Member of BC Press Council