The Federal Reserve’s new Chairperson has told lawmakers the UK economy recovery is still “far from complete”.
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Speaking on Tuesday, Janet Yellen also said that the direction of the Fed was likely to follow the path it was already taking under previous chairperson Ben Bernanke’s leadership.
“I served on the committee as we formulated our current policy strategy and I strongly support that strategy,” she noted.
However, Yellen made subtle references as to how she would be implementing her own influence over the Fed’s future direction.
Yellen has taken over the role of chair as the US job market seems to have stalled. In January, America only added 113,000 new jobs to its jobs market, which is only a small increase of the worryingly low 75,000 increase in December.
Both these figures are well below previous forecasts – fueled by an early 2013 economy which saw an average of 194,000 jobs being created each month.
“The pace of job creation [is] running under what I had anticipated,” she noted.
“But we have to be very careful not to jump to conclusions in interpreting what those reports mean.”
Speaking at her inaugural appearance as the bank’s first chairwoman, Yellen remarked that the spate of extremely bad weather in the country could have affected the numbers.
She did not state if the slow pace of growth within the jobs market may affect the US slowdown of its USD 65 billion-a-month quantitate easing programme – which has seen the Fed dramatically cut back on its overseas bond buying stimulus programme.
Yellen did however note that it would take a “notable change” to affect the reduction on America’s bond buying, and clarified that the programme was “not on a pre-set course.”
Raising interest rates
In 2012, the Fed stated that short term interest rates would be kept near zero for as long as unemployment remained higher than 6.5%.
Yet Yellen appears to be distancing herself from this stance.
With unemployment reaching 6.6% in January, but the long term unemployment rate remaining high, many are calling for more clarification on the matter.
Compounding this that, as of January, multiple demographic groups still face high rates of unemployment, including teenagers (20.7%), African Americans (12.1%), and Hispanics (8.4%).
In addition, large numbers of part-time workers would prefer full-time positions – another factor Yellen cites as a weakness in the US job market.
“These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the US labour market,” she concluded.
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