WASHINGTON — Janet Yellen, the new chairwoman of the Federal Reserve, told Congress on Tuesday the central bank maintained its optimistic view of the economy and its determination to retreat slowly from its stimulus campaign.
Yellen’s first public remarks as chairwoman were hard to distinguish from the final public remarks of her predecessor, Ben Bernanke. She told members of the House Financial Services Committee that she was not seeking to change the Fed’s course.
“I expect a great deal of continuity,” said Yellen, who was most recently the Fed’s vice chairwoman. Referring to the Federal Open Market Committee, which sets monetary policy, she said, “I served on the committee as we formulated our current policy strategy, and I strongly support that strategy.”
Yellen reiterated the Fed’s optimistic assessment that economic growth would strengthen this year, and said the Fed would continue to cut back its monthly bond purchases unless there was a “notable change” in the Fed’s economic outlook.
After expanding its holdings of Treasury and mortgage-backed securities by $85 billion each month last year, the Fed reduced the monthly pace to $75 billion in January and to $65 billion in February. Yellen affirmed that another reduction was likely at the Fed’s March meeting.
She said she was “surprised” by the federal estimates of disappointing job growth in December and January but cautioned against “jumping to conclusions” in assessing the longer-term trend.
She also emphasized that the recovery of the labor market was “far from complete.” In particular, Yellen said she continued to regard the low level of employment as a problem that monetary policy had the power to improve, rejecting the idea that the demographic factors like an aging population were solely responsible.
“I am inclined to believe myself based on the evidence that there are also cyclical factors at work,” she said.
Yellen also highlighted the Fed’s regulatory responsibilities, saying, “The work of making the financial system more robust has not yet been completed.”
The economy remains scarred by the financial crisis. Growth is tepid, unemployment high and inflation sluggish. But Yellen reiterated the Fed’s view that things are getting better.
“The economic recovery gained greater traction in the second half of last year,” she said, citing the growth of spending by consumers and businesses. She said the Fed continued to expect “that economic activity and unemployment will expand at a moderate pace this year and next.”
Yellen also downplayed concerns about turbulence in emerging markets like Turkey, which has been exacerbated by the Fed’s retreat.
“We have been watching closely the recent volatility in global financial markets,” she said. “Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook.”
The central bank said in 2012 that it planned to keep short-term interest rates near zero at least as long as the unemployment rate remained above 6.5 percent. It has since said that it was most likely to maintain that policy well past that threshold. But with the unemployment rate reaching 6.6 percent in January, a number of Fed officials have said there is a need for greater clarity about its plans.
Several Democrats pressed Yellen to take stronger action to reduce unemployment.
“I remain concerned that more needs to be done to address the long-term unemployment crisis,” said Rep. Maxine Waters of California, the ranking Democrat on the House committee. “I hope you will press your colleagues on the Federal Open Market Committee to take into account the ongoing impact that this long-term unemployment crisis is having on millions of American families.”
Yellen will answer questions before a Senate committee on Thursday. The Fed reports to Congress twice a year about its conduct of monetary policy.