Janet Yellen, nominated to be the next chairman of the Federal Reserve, said the economy and labor market are performing “far short of their potential” and must improve before the Fed can begin reducing monetary stimulus.
“A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases,” Yellen, the Fed’s vice chairman, said in testimony prepared for her nomination hearing tomorrow before the Senate Banking Committee. “I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”
The remarks show Yellen is committed to the central bank’s strategy of attempting to boost the economy and lower 7.3 percent unemployment, more than four years after the economy began to recover from the longest and deepest recession since the Great Depression. She also signaled support for capital and liquidity rules to help reduce the perception that some banks are too big to fail.