Fed Chair Says US Economy Facing Numerous Uncertainties

Federal Reserve Chair Janet Yellen said Tuesday that the U.S. economy faces numerous uncertainties from slowing job growth to stubbornly low inflation that compel the Fed to proceed cautiously in raising interest rates.

In her semi-annual report to Congress on Tuesday, Yellen expanded on a theme she has raised lately about the country’s long-term health: The economy may be stuck in a prolonged period of slow growth that will keep rates ultra-low for an extended period of time.

“Considerable uncertainty about the economic outlook remains,” Yellen told members of the Senate Banking Committee. “Although I am optimistic about the longer-run prospects for the U.S. economy, we cannot rule out the possibility expressed by some prominent economists that the slow productivity growth seen in recent years will continue into the future.”

Yellen’s comments seemed to be a nod to the arguments advanced by former Treasury Secretary Larry Summers that the economy is stuck in period of secular stagnation, a slow-growth funk that isn’t going to end in the foreseeable future.

In her news conference last week, Yellen discussed various headwinds such as weak productivity and the aging of the population, which could keep the Fed’s policy rate lower for a longer period.

She said Fed officials were constantly reassessing those forces and deciding whether they “are not going to be rapidly disappearing but will be part of the new normal.”

Yellen’s comments Tuesday marked the third time in recent weeks that she has stressed all the unknowns that are keeping the Fed from raising rates.

via Mainichi

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza