UPDATE 1-Obama says Fed 'properly focused' on unemployment -CNBC

Thu Jul 24, 2014 6:02pm EDT

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(Adds comments on stock market, background)

WASHINGTON, July 24 (Reuters) - U.S. President Barack Obama said on Thursday the Federal Reserve was "properly focused" on unemployment given the relatively tame pace of inflation in the country, offering a broad endorsement of Fed Chair Janet Yellen's policy approach.

"The cost of unemployment, particularly long-term unemployment, as well as unemployment for young people just getting started in their careers, that is something that has devastating effects on the economy for generations to come," Obama told business cable network CNBC.

"Janet Yellen has said this is a focus of ours right now. Inflation remains relatively low."

Obama's remarks came in response to a question about whether record U.S. stock market values raised the risks of an equity bubble. Obama said he felt the Fed's low-interest rate policy - maintained in the battle against unemployment - had pushed investors to look to stock markets for better returns.

"When you have low interest rates, there is a lot of money looking for returns and that has probably boosted the stock market significantly," Obama said.

"My estimation is that you have a lot of savvy investors out there ... I will leave it up to them to determine whether valuations are too high," he added, sidestepping the question.

His comments amounted to a timely bit of encouragement as Yellen navigates an intensifying debate about when to raise interest rates from their current level near zero.

The Fed's policymaking committee, which meets next week, is not expected to begin bumping interest rates until around the middle of next year.

A recent uptick in prices and possible signs of rising wages have led some Fed officials to urge faster action.

Yellen, however, has held to her view that labor markets remain slack. She has said the economy needs a period of rising wages before she will be convinced the job market is fully healthy. (Reporting by Howard Schneider; Editing by Tim Ahmann and Andre Grenon)

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