Janet Yellen’s congressional testimony
This week, Janet Yellen gave her first semi-annual monetary policy testimony before Senate Banking Committee. Primarily, her testimony emphasized continuity with existing monetary policies. She maintained that the Fed would continue with its tapering, which commenced in December, in “measured steps”—provided the FOMC outlook was met.
Fed Chair Janet Yellen said in her testimony:
- “Recovery in the labor market is far from complete… Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high… These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market… It’s important for us to take our time to assess the significance of recent reports showing payrolls expanded less than projected.”
She said the decline in labor force participation was due to cyclical and structural factors and the weakness in job creation numbers in December and January were surprising, though a part of this may be due to the severely cold weather.
The Fed Chair saw no conflict in the Fed’s dual mandate of ensuring full employment with inflation targeted at 2%. She said the Fed would increase bond purchases if the inflation rate were very low and it wanted to be very sure that inflation was approaching the 2% level before changing the course of tapering.
To read about another indicator released yesterday with more employment news for December, read on to Part 3 of this series.