Yellen cites recent housing weakness as economic risk

by Ryan Smith08 May 2014
Federal Reserve Chair Janet Yellen cited recent weakness in the housing market as a risk to economic recovery in her testimony before a congressional committee Wednesday.

“The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery,” she said.
Yellen said the economy was still in need of government support, citing both the recent housing sector weakness and the “considerable slack” in the labor market.

She told the committee that there had been appreciable gains in the labor market, but that the high long-term unemployment rate showed there was more left to do.

Yellen also addressed the decision of the Federal Reserve’s governing committee to taper the Fed’s bond-buying stimulus program. She said that even as the Fed reduced purchases, the program continued to boost the economy.

“I should stress that even as the committee reduces the pace of its purchases of longer-term securities, it is still adding to its holdings, and those sizable holdings continue to put significant downward pressure on longer-term interest rates, support mortgage markets, and contribute to favorable conditions in broader financial markets,” she said.



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