Federal Reserve Chair Janet Yellen told lawmakers the central bank must press on with monetary stimulus as “significant slack” remains in labor markets and inflation is still below the Fed’s goal.
“A high degree of monetary policy accommodation remains appropriate,” Yellen said today in semi-annual testimony prepared for delivery to the Senate Banking Committee. “Although the economy continues to improve, the recovery is not yet complete.”
Yellen cited labor-market weaknesses even after an unexpectedly fast decline in unemployment put pressure on Fed officials to consider accelerating their timetable for an interest-rate increase. Yellen said today that rates are likely to stay low for a “considerable period” after bond purchases end, which she said could happen following the Fed’s October meeting.
While the economy appears likely to rebound from a first-quarter contraction, Yellen said the progress “bears close watching.” Signs of labor-market slack include slow wage growth and low labor-force participation, Yellen said. Housing “has shown little recent progress” as higher mortgage rates discourage buyers.
The jobless rate fell to an almost six-year low of 6.1 percent last month, close to the level most Fed officials predicted for the end of the year. Payrolls surged by 288,000 workers, boosting the average monthly advance so far this year to almost 231,000.