Yellen looks set to keep QE on course

by Adam Smith14 Nov 2013

Presumptive Fed chair Janet Yellen is continuing the dovish dialogue of her predecessor.

In prepared testimony released yesterday ahead of her Senate confirmation hearing on Tuesday, Yellen insinuated that the Fed would stay its course of quantitative easing, saying that the economy would have to bounce back further before the Fed's monetary policy could take "a more normal approach".

"We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession," she said. "Unemployment is down from a peak of 10%, but at 7.3% in October, it is still too high, reflecting a labor market and economy performing far short of their potential," Yellen's testimony said.

Yellen suggested that the Fed would have to continue to support the economy, and would only wind back its bond-buying program in the wake of "strong recovery".

"A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy," she said.



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