“We have to be very careful not to jump to conclusions” about recent weak job gains, she told the House Financial Services Committee as she delivered her first semi-annual testimony before Congress. She cited extreme winter weather that hobbled the economy and job market.
By the time the Fed next meets March 18-19, she said, Fed policymakers will be able to assess job growth in February, and will also look at a range of data, including consumer spending. Monthly job gains, which averaged more than 200,000 from August to November, slowed to 75,000 in December and 113,000 in January.
The Fed is buying $65 billion a month in Treasury bonds and mortgage-backed securities after reducing purchases by $10 billion in each of the past two months. Citing an acceleration in the economy and job gains, Yellen reiterated plans to trim purchases in “measured steps” this year.
She said it would take “a notable change in the outlook” for the Fed to pause its tapering strategy.
“It’s a fairly high bar to shake the Fed off the pattern it’s on,” says Barclays Capital economist Michael Gapen. He says Yellen’s testimony shows she may be more of a “centrist” as chair after being known as more concerned with stimulating job growth than preventing high inflation.
Yellen, who was previously vice chair, became the first woman to lead the central bank on Feb. 3, succeeding Ben Bernanke.
She downplayed concerns that the waning of the stimulus is partly responsible for emerging market woes as higher U.S. interest rates prompt investors to pull money from overseas holdings and shift it to the U.S. She said the Fed made clear it would pare purchases as the recovery advanced.
Yellen said the Fed expects the economy to expand “at a moderate pace” this year and in 2015 after picking up the second half of 2013. But with unemployment at 6.6 percent, she said the labor-market recovery “is far from complete.”
She is to testify before the Senate’s banking panel on Thursday.
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