Yellen Defends QE as Economic Benefit in Letter to Senator

“Janet Yellen, the nominee for Federal Reserve chairman, defended the central bank’s bond purchases in a letter to a U.S. senator, saying they boosted economic growth and provide benefits that exceed the risks.  ‘By putting downward pressure on longer-term interest rates and helping to make financial conditions more accommodative, the Federal Reserve’s asset purchases have supported a stronger economic recovery, improved labor-market conditions and helped keep inflation closer to its 2 percent objective,’ Yellen said in a Nov. 18 response to questions from Senator David Vitter, a Republican from Louisiana.” “In a separate letter to Senator Elizabeth Warren, Yellen said ‘monetary policy is likely to remain highly accommodative for a long time,’ even after the Fed reaches thresholds for considering an increase in the main interest rate.  Yellen, at a Nov. 14 confirmation hearing, told the Senate Banking Committee she’s committed to promoting a strong recovery, reducing 7.3 percent unemployment and ensuring stimulus isn’t removed too soon. The Fed has held the main interest rate near zero since December 2008 and pumped up its balance sheet to a record $3.91 trillion through bond purchases.” “Yellen said in her Nov. 18 letter to Warren that the Federal Open Market Committee’s pledge to keep the main interest rate exceptionally low as long as the unemployment rate exceeds 6.5 percent should be considered a threshold, not a trigger for action.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

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