15 Jul 2014
Yellen defends current Fed policy
Fed head Janet Yellen, who testified on Tuesday before the US Senate Banking Committee, suggested that the US economic recovery was not complete yet, despite recent improvements, therefore a "high degree" of accommodation remained appropriate.
Yellen pointed to the considerable slack still evident on the US labor market. "Too many Americans remain unemployed," she stressed adding that in the meantime inflation remained below the 2% target.
She signaled that if the employment situation improved at a quicker pace than currently estimated, rate hikes could come earlier than projected by the FOMC at the moment, but still she saw rates remaining at low levels long after the withdrawal of QE.
The Fed chief also expressed concern about the recovery on the US housing market, which had shown little progress this year.
FOMC's growth, unemployment and inflation forecasts are surrounded by "considerable uncertainty," Yellen said.
In the Q&A part of the testimony the Fed chief admitted that the recovery on the labor market, although slow, was evident and that many economic indicators were improving substantially. The decline in Q1 GDP was most probably due to transitory factors, she suggested.
Nevertheless, she wouldn't be more specific about the timing of the first rate hike, as it depended on further progress. The US economy has to be seen on a solid trajectory before rates start rising, Yellen stressed.
Jamie Coleman from FXBeat believes that this sums up Yellen's stance: "She would rather see the economy overheat a little than derail a rebound prematurely as the Fed has done twice since the financial crisis."
The EUR/USD began to move lower amid jitters minutes before the testimony of Fed Chair Yellen before the US Congress, but bounced before hitting daily lows as the testimony gets underway.
Yellen pointed to the considerable slack still evident on the US labor market. "Too many Americans remain unemployed," she stressed adding that in the meantime inflation remained below the 2% target.
She signaled that if the employment situation improved at a quicker pace than currently estimated, rate hikes could come earlier than projected by the FOMC at the moment, but still she saw rates remaining at low levels long after the withdrawal of QE.
The Fed chief also expressed concern about the recovery on the US housing market, which had shown little progress this year.
FOMC's growth, unemployment and inflation forecasts are surrounded by "considerable uncertainty," Yellen said.
In the Q&A part of the testimony the Fed chief admitted that the recovery on the labor market, although slow, was evident and that many economic indicators were improving substantially. The decline in Q1 GDP was most probably due to transitory factors, she suggested.
Nevertheless, she wouldn't be more specific about the timing of the first rate hike, as it depended on further progress. The US economy has to be seen on a solid trajectory before rates start rising, Yellen stressed.
Jamie Coleman from FXBeat believes that this sums up Yellen's stance: "She would rather see the economy overheat a little than derail a rebound prematurely as the Fed has done twice since the financial crisis."
The EUR/USD began to move lower amid jitters minutes before the testimony of Fed Chair Yellen before the US Congress, but bounced before hitting daily lows as the testimony gets underway.