U.S. Federal Reserve Chair Janet Yellen (front) testifies before the Senate Banking Committee of U.S. Congress during a hearing on Capitol Hill in Washington D.C., capital of the United States, July 15, 2014. U.S. Federal Reserve Chair Janet Yellen on Tuesday reiterated that the central bank would continue to implement current easy monetary policy as the U.S economy recovery remains incomplete and many Americans remain unemployed. (Xinhua/Bao Dandan)
WASHINGTON, July 15 (Xinhua) -- U.S. Federal Reserve Chair Janet Yellen on Tuesday reiterated that the central bank would continue to implement current easy monetary policy as the U.S economy recovery remains incomplete and many Americans remain unemployed.
In delivering the semi-annual monetary policy report to Congress, Yellen said that "although the economy continues to improve, the recovery is not yet complete."
"Too many Americans remain unemployed, inflation remains below our longer-run objective," Yellen told lawmakers before the Senate Banking Committee, although latest data showed the unemployment rate declined to 6.1 percent last month, the lowest level in almost six years.
Yellen said the labor force participation rate and other indicators suggest that "significant slack" remains in the labor market and "a high degree of monetary policy accommodation remains appropriate."
Yellen played down the significance of sharp contraction of economic activity in the first quarter, saying it was likely the result of "transitory factors" and that a number of recent indicators of production and spending suggest that economic growth "rebounded" in the second quarter.
But she cautioned that the economic outlook "bears close watching," as the housing recovery "has shown little recent progress."
"While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year's increase in mortgage rates, and readings this year have, overall, continued to be disappointing," Yellen said.
The Fed has stuck to its plan to trim its asset purchase program by 10 billion U.S. dollars every policy meeting this year, and is on track to end the program in October if the U.S. economy progresses as expected, according to the minutes of the Fed's June monetary policy meeting released last week.
The Fed also said it is appropriate to keep its benchmark short- term interest rates near zero for a considerable time after the asset purchase program ends. But Yellen, in her remarks, gave no indication when the central bank would raise its benchmark short- term interest rate, which was at a record low of near zero since December 2008.
Yellen said the future path of the Fed's monetary policy will depend on how well the economy performs. If the labor market conditions continue to improve more quickly than anticipated, the Fed could raise its short-term interest rate sooner than currently expected, she said.
"If economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated," Yellen said. Most market participants predict the Fed will wait until mid-2015 to start raising interest rates.