Fed chair vows to 'do all that I can' to boost weak U.S. economy
Andrew Harrer/Bloomberg via Getty Images
By Ann Saphir, Alexandra Alper and Jonathan Spicer

SEATTLE, MEXICO CITY and WASHINGTON -- Federal Reserve Chair Janet Yellen vowed Wednesday to "do all that I can" to boost a U.S. economy where unemployment is too high and inflation is too low.

"The economy continues to operate considerably short" of the central bank's objectives of full employment and stable prices, Yellen said at a swearing-in ceremony at the central bank in Washington.

"The economy is stronger and the financial system is sounder," added Yellen, who succeeded Ben Bernanke on Feb. 1. "We have come a long way, but we have farther to go."

The brief comments were a broad reiteration of what she told two congressional committees last month: that the United States appears to be clawing its way back from the 2007-2009 recession but that the Fed is in no rush to tighten policy.

Speaking clear across the country, San Francisco Fed chief John Williams gave a more upbeat assessment of the economy, and suggested that rate hikes could come as soon as next year.

"My own view, based on my own forecast, is that it would be sometime around the middle of next year," Williams told reporters after a speech to students at the University of Seattle. "It could be later or earlier, depending on how the economy does."

Williams said he projects the economy to grow about 2.5 percent this year,
slower than he had earlier projected because of the effects of an unusually cold weather, but fast enough to bring down the unemployment rate to 6.25 percent by year's end.

That is down from a 6.6 percent reading in February, said Williams, who was Yellen's top researcher when she ran the San Francisco Fed before moving to Washington as Fed vice chair in 2010.

Next year, he projected, 3 percent growth will likely bring unemployment down to near-normal levels of 5.5 percent by the end of 2015.

Still, he said, because of the lasting damage of the financial crisis to the economy, the Fed may not raise rates all that high, at least at first.

"My own view is that we still have significant, if you will, headwinds to the economy over the next several years that are still slowing growth in terms of demand, relative to trend, so that we need a lower real interest rate, fed funds rate, than you would in say, over history," he said.

Differences Exist

The views of the policymakers that head the Fed's 12 regional reserve banks are sometimes at odds with those of the Fed chair in Washington.

The differences underscore the challenges Yellen will face in crafting the future of monetary policy as she heads to her first Fed policy-setting meeting as chair, later this month.

Dallas Fed President Richard Fisher, one of the Fed's most vociferous opponents of its massive bond-buying program, made his differences with Yellen clear in a speech in Mexico City on Wednesday.

"There are increasing signs quantitative easing has overstayed its welcome: Market distortions and acting on bad incentives are becoming more pervasive," he said of the Fed's asset purchases, which are sometimes called QE.

Yellen has supported the bond-buying from its beginning, though she has also lent her weight to the decision late last year to begin paring the program back, with a view to ending it this year.

The program has resulted in a Fed balance sheet of more than $4 trillion and ballooning reserves at banks, which Fisher and a few others at the Fed worry could fuel future inflation.

"The real tools that we are focusing on are how we manage the exit from the current hyper-accommodative monetary policy and how do we make sure ... that we do it in a way that doesn't allow the current very large and presently non-inflationary monetary base ... from becoming inflationary," Fisher said following his speech.

The world's biggest economy expanded at a decent 2.4 percent rate in the fourth quarter and has slowed this year due in part to severe weather.

The U.S. unemployment rate is down from a recessionary high of 10 percent in 2009, but it remains high and jobs growth is erratic. Inflation, meanwhile, is languishing near 1 percent, about half the Fed's 2 percent target.

"Too many Americans still can't find a job or are forced to work part time," Yellen said on Wednesday, underscoring her long-standing focus on the troubled labor market.

"I promise to never forget the individual lives, experiences and challenges that lie behind the statistics we use to gauge the health of the economy," she said. "When we make progress toward our goals, each job that is created lifts this burden for someone who is better equipped to be a good parent, to build a stronger community, and to contribute to a more prosperous nation."

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This is just another manipulation of the numbers to tell them what they want to hear. Unemployment dropped significantly when they cut the benefits, because they use the number of people on unemployment, not the actual unemployed. Nothing has changed in this recession. The Fed was started to make sure there was never a depression again and touted as such. Now it is evident that was just a sales pitch to gain control of our financial system, time to get rid of them.

March 06 2014 at 8:44 AM Report abuse +1 rate up rate down Reply
1 reply to cbailey621's comment

The unemployment rate has nothing to do with the number of people receiving unemployment benefits.

Rather, it is merely a statistical sample of the people who are not employed but actively seeking employment as a percentage of the total work force.

March 06 2014 at 9:35 AM Report abuse +1 rate up rate down Reply

I don't think that's your job. I don't know what your job is. perhaps The Fed should be audited and ended?

March 06 2014 at 8:30 AM Report abuse +1 rate up rate down Reply
Daren Miller

The chairman/woman of the Fed. should shut up. This is not a political job and the Fed should not telegraph everything that is going to do.

March 06 2014 at 8:05 AM Report abuse +1 rate up rate down Reply

were still in obams "great recession" today with still record unemplioyment n record foreclosures,as america will stay closed untill obams is removed from our white house in handcuffs~~america is waiting...... zzzzzzzzzzzzzzzzzzzzzz

March 06 2014 at 7:59 AM Report abuse -1 rate up rate down Reply

This is great but sounds like short term fixes. We need a solid long term plan instead of going from one employment crisis to the next.
We need to change the tax base to encourage foreign manufacturers to locate in the United States and employ American workers. Even if we give them free federal lands to build plants on we'll be ahead. Why ? Because here is how it's currently working: A foreign nation builds automobiles.
Americans buy the automobiles and US cash goes to the foreign country. In time we have a pile of rusty automobiles, and the foreign country has our money. Quickly the money runs out and then we have to borrow it back - in essence the borrower is slave to the lender.
The end result is: We have no jobs, no money, no prosperity, and we are leveraged up to our eye balls. Offer the foreign countries incentives to build the plants here in the US.
There are millions of acres of unused federal lands out West. Give them a few hundred acres. Make sure they have good resources available like water, power, rail heads, etc.
This will increase our Treasury revenues through payroll income tax.

March 06 2014 at 7:58 AM Report abuse +2 rate up rate down Reply
1 reply to alfredschrader's comment

There are multiple foreign owned auto manaufacturing plants in the US already. Their motivation to build here is to be closer to their customer, much as is typically the case when a US corporation builds a plant overseas.

In other words, markets already provide the proper incentives for production to occur at its most efficient locale. Government goons who interfere with this process by providing artificial incentives can only cause harm.

March 06 2014 at 8:35 AM Report abuse -3 rate up rate down Reply
1 reply to true_liberal's comment

We folks in the tea party hate the government goons.

March 06 2014 at 8:37 AM Report abuse +5 rate up rate down

seeing is believing....

March 06 2014 at 7:30 AM Report abuse +1 rate up rate down Reply

Stay home Janet.

March 06 2014 at 7:27 AM Report abuse +2 rate up rate down Reply