Yellen to stay Bernanke course

The Federal Reserve would take further measured steps to reduce its monetary support for the economy, the central bank's new chairwoman announced Tuesday.

Pledging a great deal of continuity with her predecessor Ben Bernanke, Janet Yellen said that she supported his view that the economy was strengthening enough to withstand a pullback in stimulus.

Yellen, who succeeded Bernanke as US Fed chief two weeks ago, made her comments in the central bank's semiannual policy report, released ahead of her testimony to the US House Financial Services Committee on Tuesday.

At meetings in January and December, former US Fed Chair Bernanke announced the central bank was trimming its purchases of US Treasuries and mortgage bonds by a total of $20 billion (14.6 billion euros) per month. The bank still buys up $65 billion a month in bonds as part of efforts to keep borrowing costs low and encourage investment and hiring.

A mixed run of US economic data recently, including lower-than-expected jobs growth of 200,000 in January, has raised doubts about the recovery.

Yellen also said the US labor market recovery was far from complete despite a drop in unemployment to 6.6 percent from 7.9 percent a year ago. An unusually large fraction of jobless Americans had been out of work for more than 6 months, and a very high number of part-time workers would prefer to work full-time, she added.

In a reference to recent turmoil in emerging economies, Yellen said the Fed was watching volatility closely, and added: “Our sense is that at this stage these developments do not pose a substantial risk to the US economic outlook.”

In its report, the Fed also indicated that it would keep its key interest rate near zero for a prolonged period, likely to last well into next year.

uhe/mkg (Reuters, AFP, AP)