Federal Reserve Chair Janet Yellen presents semi-annual monetary report to Senate Banking Committee, in Washington.
In a repeat of yesterday's speech to the House Services Committee, Janet Yellen, testifying today before the Senate Banking Committee, is pointing to continuing slack in the labor market and repeating that monetary policy, even after liftoff, will remain accommodative for some time ahead. She also cites uncertainty over the status of Greece and uncertainty over China, where growth is slowing, as wildcards. But she's definitely upbeat on the fundamentals of the U.S. economy which she believes is gaining strength. She repeated that Fed policy is data dependent on a meeting-by-meeting basis and that liftoff is likely to happen sometime later this year.
In questions and answers, Yellen noted that monetary policy works with a lag and that acting too late, thus allowing the economy to overheat, could necessitate a greater degree of tightening. In a more dovish comment, she said the number of those working part time who would rather work full time is higher than expected and that the unemployment rate is understating slack in the labor market. On inflation risks tied to wage growth, Yellen conceded that the employment cost index has been on the rise but that two other key measures, hourly compensation and average hourly earnings, are not picking up steam. In a dovish conclusion, she said levels of wage growth are still relatively low and are increasing less rapidly than productivity. Markets are showing no reaction to her comments.
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