Yellen Says Recovery in Labor Market Far From Complete

Washington (Feb 11)  Federal Reserve Chairman Janet Yellen pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps” and signaled that the bar is high for a change in that plan.

Only a “notable change in the outlook” for the economy would prompt policy makers to slow the pace of tapering, Yellen said in response to a question today during testimony to the House Financial Services Committee. “It’s important for us to take our time to assess” the significance of recent reports showing payrolls expanded less than projected, she said.

Yellen, delivering her first public remarks as Fed chairman, said financial-market turmoil doesn’t pose a major risk to the outlook for the U.S. economy and repeated the Fed’s statement that asset purchases aren’t on a “pre-set course.”

While growth has picked up, “the recovery in the labor market is far from complete,” Yellen said earlier in prepared remarks. “I am committed to achieving both parts of our dual mandate: helping the economy return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level.”

Stocks climbed and Treasuries fell. The Standard & Poor’s 500 Index rose 0.8 percent to 1,814.38 at 12:01 p.m. in New York. The yield on the 10-year note rose five basis points, or 0.05 percentage point, to 2.72 percent.

“Her message was continuity of policy and, matching that with continuity of outlook, suggests they remain on the same course,” saidKeith Hembre, a former Minneapolis Fed researcher who helps oversee $125 billion as chief economist at Nuveen Asset Management LLC in Minneapolis.

(Source:  Bloomberg)