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Uncertainty is what's certain about the economy: Yellen

Wednesday, May 07, 2014 - 02:38

May 7 - Fed Chair Janet Yellen told the congressional Joint Economic Committee that risks facing the U.S. economy include a disappointing housing sector, labor market imbalances, and geopolitical tensions. Lily Jamali reports.

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The theme of Federal Reserve Chair Janet Yellen's testimony before the congressional Joint Economic Committee Wednesday was risk. There's still plenty of it facing the U.S. economy. Those risks range from geopolitical tensions to the job market, which despite improvements to the unemployment rate is still vulnerable. SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "We've really never seen a situation where long-term unemployment is so large, so large a fraction of total unemployment. Around 35%. That's very unusual." Yellen also called out concerns on the housing sector. SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "One cautionary note though is that readings on housing activity - a sector that has been recovering since 2011 - have remained disappointing so far this year and will bear watching." Fred Dickson, Chief Investment Strategist at D.A. Davidson - says that's because housing is a leading indicator of what's to come in the economy. SOUNDBITE: FRED DICKSON, CHIEF INVESTMENT STRATEGIST, D.A. DAVIDSON (ENGLISH) SAYING: "She sees the housing start numbers being probably 25% of what they should be at this point in the cycle. She knows housing has a very big economic impact, with each dollar spent on a house in some ways generates four more dollars through the ancillary services, contractor, contractor spending." Yellen fielded many questions on the Fed's monetary policy - known as quantitative easing. She confirmed the program is on track to wind down by this fall. SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "We anticipate continuing to reduce our asset purchases in measured steps. So the answer is Yes. Now if something were to change notably about the outlook, we would reconsider that plan." Reconsideration - she said - would stem from a downturn in the labor market or disruptions to inflation, which she expects will rise to around 2% . However, the panel couldn't pin her down on when the Fed would raise rates.She was committed to staying vague on that subject. SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "There's no mechanical formula or timetable." SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "There is no specific timeline for doing that." SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "The Committee has simply said a 'considerable time' without mechanically stating what that time interval is." Yellen remains very concerned about the labor market. Although the latest Labor Department data shows unemployment is down to 6.3% - a five and a half year low - she says it's down for the wrong reasons. And for those still in the workforce, wages remain a worry.

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Uncertainty is what's certain about the economy: Yellen

Wednesday, May 07, 2014 - 02:38