Federal Reserve Chair
Yellen also told
Stocks fell as Yellen began her testimony. Her written report to
Annual inflation has been picking up, but at 1.8%, remains below the Fed's 2% target. Noting that wage gains are modest, she said they're "not rising to the point where they can give way to inflation." With consumer price increases accelerating and the unemployment rate falling rapidly, some economists have said the Fed should gear up to raise its benchmark short-term interest rate sooner than planned. Although the Fed is winding down its bond-buying stimulus, Fed policymakers have indicated that they plan to raise the short-term rate -- near zero since the financial crisis -- sometime in 2015.
"There's no formula or mechanical answer I can give you" on when specifically the Fed plans to raise rates, Yellen said when pressed by Sen.
She added, "The economic outlook is very uncertain." Yellen did say that "if the labor market continues to improve more quickly than anticipated" by policymakers, "then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned."
In a research note,
But Yellen said several labor market indicators, such as share of the population in the workforce, remain low. Noting the economy still faces headwinds from the recession, such as low productivity growth, Yellen told lawmakers: "We have seen false dawns" before.
She said the economy's 2.9% decline in output in the first quarter "appears to have resulted mostly from transitory factors," and recent data suggest that growth rebounded in the second quarter.
But she added "this bears close watching." She also noted that the housing sector "has shown little recent progress."
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