The Federal Reserve has helped the nation rebound from the Great Recession, but there still is more work to be done to reduce unemployment and get the economy back on track, Fed chair nominee Janet L. Yellen will tell senators at her confirmation hearing Thursday.
In written testimony released by the Senate Banking Committee on Wednesday, Yellen said the 7.3 percent unemployment rate “is still too high” and inflation is running below the Fed’s long-term goal of 2 percent.
Those two factors justify the continued use of aggressive monetary policy actions, such as the controversial bond-buying stimulus program, she said.
“A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases,” Yellen, the Fed’s vice chair, said in her four-page statement. “I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”
Yellen, who has served on the Fed board since 2010, defended the central bank’s actions to address the financial crisis and Great Recession. She has been a strong ally of Fed Chairman Ben S. Bernanke, whose second four-year term as central bank chief ends Jan. 31.
“Under the wise and skillful leadership of Chairman Bernanke, the Fed helped stabilize the financial system, arrest the steep fall in the economy, and restart growth,” she said. “Today the economy is significantly stronger and continues to improve.”
But those improvements aren’t enough and “we have farther to go to regain the ground lost in the crisis and the recession,” Yellen said.
President Barack Obama nominated Yellen last month to succeed Bernanke. If confirmed, as expected, she would be the first woman to lead the Fed.
But the central bank has been strongly criticized for its unprecedented efforts to stimulate growth, which have caused the Fed’s balance sheet to more than quadruple to nearly $4 trillion since 2008. Yellen could face some tough questions about the Fed’s efforts from Republicans at her confirmation hearing.
Some critics want the Fed to be more open about its monetary policy actions. Sen. Rand Paul, R-Ky., has said he would delay a confirmation vote by the full Senate unless Democratic leaders allow a vote on his legislation providing for more expansive audits of the Fed.
Yellen said she has supported Bernanke’s recent efforts to be more open about the Fed’s long-term policy goals. She did not mention expanded audits, which Bernanke has opposed.
“Like the chairman, I strongly believe that monetary policy is most effective when the public understands what the Fed is trying to do and how it plans to do it,” she said. “I have strongly supported this commitment to openness and transparency, and will continue to do so if I am confirmed and serve as chair.”
Source: MCT Information Services