Fed Chair Yellen says no major policy change, on track to keep trimming stimulus

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The new head of the US central bank, Janet Yellen, has reassured the financial markets by signalling she is not about to make any abrupt changes to the country’s monetary policy.

In her first public comments since taking over from Ben Bernanke, Yellen emphasised that the Federal Reserve will keep trimming stimulus. She was being questioned by lawmakers on the House Financial Services Committee.

Yellen does not believe the US economy is back to normal but thinks it is on the way, though with question marks over job creation.

“The economic recovery gained greater traction in the second half of last year; nevertheless, the recovery in the labour market is far from complete,” she said.

On the trimming of stimulus through the Fed’s buying of bonds, Yellen said that remains on track: “If incoming information broadly supports the (Federal Open Market) Committee’s expectation of ongoing improvement in labour market conditions, and inflation moving back towards its longer run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings.”

That would change, Yellen said, is if there was a significant deterioration in the US economy as the purchases of billions of dollars worth of bonds are not on a pre-set course.

The recent weak US jobs growth and a sell off in emerging markets that also hit Wall Street could complicate things for the Fed.

Asked about recent volatility in emerging markets she said right now that poses no substantial risk to the US economic outlook.

And she reinforced the central bank’s expectation that inflation, while low now, will rise back toward the Fed’s 2.0 percent goal.

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