- POSTED: 28 Feb 2014 05:11
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Federal Reserve Chair Janet Yellen has said that the intense winter storms of the past two months have been one cause of the recent run of weak US economic data.
WASHINGTON: Federal Reserve Chair Janet Yellen said Thursday that the intense winter storms of the past two months have been one cause of the recent run of weak US economic data.
But, after several key indicators came in well below expectations since she last addressed the state of the economy, Yellen said that Fed policy makers are on the watch for any fundamental changes in the pace of growth.
"We have seen quite a bit of soft data over the last month or six weeks," she told the Senate Banking Committee.
"I think it's clear that unseasonably cold weather has played some role in much of that.
"What we need to do and will be doing in the weeks ahead is to try to get firmer handle on exactly how much of that set of soft data can be explained by weather and what portion, if any, is due to softer outlook."
Since December and notably since Yellen expressed confidence in the economy's health in an appearance at a House of Representatives panel on February 11, middling or weak data on job creation, retail sales, industrial production and the housing sector has surprised analysts.
While many have downplayed the disappointing indicators as the impact of severe storms which shut down stores and discouraged companies from actively hiring, the persistence of the numbers has some worried that the economy is more broadly slowing.
The question could determine how the Fed continues with its two-month-old operation to reduce its bond buying stimulus program, cut by $20 billion since December to the current level of $65 billion a month.
Yellen said the Fed remained committed to tapering the stimulus, which in current Fed expectations would be wound up by late this year.
"If there's a significant change in the outlook, certainly we would be open to reconsidering (the stimulus taper), but I wouldn't want to jump to conclusions here," she told the Senate panel.
If there is a signficant change in the economic outlook from what the Federal Open Market Committee outlined in recent months, she said, the plan to taper the bond purchase program could be reconsidered.
Yellen, who became chair of the Fed on February 1, generally adhered to the most recent forecasts of the monetary policy-making Federal Open Market Committee, which see growth proceeding this year at a moderate pace and no reason to worry about price rises.
And she showed no sign of deviation from the policies of her predecessor, Ben Bernanke, who kept Fed policy over the past five years focused on helping the jobs market in the absence of any threat of inflation.
Yellen confirmed that inflation remains well below the Fed's two percent target, while unemployment remains a significant problem, despite the fall in the official jobless rate to 6.6 per cent in January.
She said an "unusually high" portion of the fraction of the US labor force works part time because full time jobs are not available.
"That's an additional seven million-plus Americans who are involuntarily employed part time. And we have unusually high fraction of Americans who are unemployed and have been for substantial amounts of time," she added.