Janet Yellen said today that the US economy has regained ground lost to the Great Recession but still needs the Federal Reserve's support because unemployment remains too high at 7.3%. Yellen is testifying this morning to the Senate Banking Committee, which is considering her nomination to be the next chairman of the Federal Reserve. Her remarks suggest she plans to stand by the Fed's extraordinary low interest rate policies begun under current Chairman Ben Bernanke until the economy shows further improvement.
The Fed's support of the recovery is the "surest path to returning to a more normal approach to monetary policy," said Yellen. She noted that the economy is still performing far below its potential. And she pointed out that inflation is running below the Fed's 2% target. The Fed's policies, which include three rounds of bond purchases, are credited with helping boost economic growth and lower unemployment. But they have also driven up stock prices and stoked worries about a greater risk of inflation and asset bubbles. Even with some Republican resistance, Yellen's backing by the committee and confirmation by the full Senate is viewed as all but assured. But approval won't come before critics air their grievances about the Fed's response to the financial crisis and the Great Recession.