12:51 PM, Nov 29, 2017 — More interest-rate increases will be needed to support gains made in the labor market and to stabilize inflation around the 2% target that has been elusive this year, Federal Reserve Chair Janet Yellen said.
In testimony before the congressional Joint Economic Committee in Washington, DC, Wednesday, Yellen said the target range on the federal funds rate will be the primary means of changing monetary policy as the Fed unwinds its balance sheet of asset purchases that were put in place to shore up the economy during the recession.
“We continue to expect that gradual increases in the federal funds rate will be appropriate to sustain a healthy labor market and stabilize inflation around the FOMC’s 2% objective,” Yellen said, according to remarks on the Fed’s website.
The world’s biggest economy has been recovering from recession sparked by the 2007-8 financial crisis, with data earlier Wednesday showing expansion in the third quarter was 3.3%, better than the Commerce department’s previous estimate of 3%. Stock markets have surged to multiple record highs in 2017 and consumer confidence indicators have risen.
Yellen, who is retiring from the Fed in February, said the growth is “increasingly broad based” and is expected to continue to firm with adjustments in monetary policy. She said that even with asset valuations that are high by historical standards, “overall vulnerabilities in the financial sector appear moderate, as the banking system is well capitalized and broad measures of leverage and credit growth remain contained.”
Still, she said Congress “might consider policies that encourage business investment and capital formation, improve the nation’s infrastructure, raise the quality of our educational system, and support innovation and the adoption of new technologies” as the US grapples with slower growth of the labor force and sluggish productivity.